TI Telecom Italia S.P.A. New

By Nick Kostov in Paris and Eric Sylvers in Milan 

PARIS-- Telecom Italia SpA is set to announce the departure of Chief Executive Flavio Cattaneo on Monday, after mounting tensions with shareholder Vivendi SA, according to people familiar with the matter.

Mr. Cattaneo would be the second CEO to depart in little over a year as Vivendi, controlled by French billionaire Vincent Bolloré, tries to influence strategy. The French media and entertainment company built a stake of nearly 25% in the Italian operator--just below the level at which an investor must make a takeover bid. Mr. Cattaneo has held the top job since March 2016 when he took over from Marco Patuano, who left after a disagreement with Vivendi over strategy.

Telecom Italia said Mr. Cattaneo's imminent exit was related to him meeting the company's financial targets ahead of time and the need for a manager with different skills. But people familiar with the matter said it follows disagreements between Vivendi management and the Italian executive. Mr. Cattaneo didn't respond to an email seeking comment.

Amos Genish, Vivendi's chief convergence officer, is set to take over most of Mr. Cattaneo's responsibilities, people familiar with the matter said. They said that Vivendi wants Telecom Italia to quickly transform its model to address stiff competition from the likes of Italian utility Enel SpA and France's Iliad SA.

Arnaud de Puyfontaine, CEO of Vivendi and chairman of Telecom Italia, is also expected to be handed more executive responsibilities on Monday, as is Giuseppe Recchi, deputy chairman of the Italian company, according to the people.

People familiar with Vivendi's position said it began to lose confidence in what it considered to be Mr. Cattaneo's brash style after he rowed with Italy's government over the rollout of ultrafast broadband, although Italian Industry Minister Carlo Calenda said this month that the standoff had been resolved.

Vivendi was also upset about Mr. Cattaneo's apparent unwillingness to work closely with its own managers, the people said. It tried to limit Mr. Cattaneo's powers by appointing a managing director to assume some of his powers but that option was shot down by the Italian executive who wanted more autonomy to complete a turnaround of the company.

"The situation was becoming crippling," said one of the people.

Still, Vivendi in recent months has praised Mr. Cattaneo's tenure, with recent earnings reports suggesting that Telecom Italia's turnaround efforts are bearing fruit, even though the Italian company's stock is down by about 15% since the executive took over. The Italian company's first-quarter revenue rose 8.5% from a year earlier, while operating profit climbed nearly 23%.

Vivendi is trying to piece together a media empire focused on southern Europe and owns assets including record label Universal Music Group and French pay-TV station Canal Plus. The company splashed out more than EUR3 billion for its stake in Telecom Italia.

Vivendi continues to be embroiled in legal disputes with Silvio Berlusconi's Mediaset SpA in Italy after pulling out of a deal last year to buy pay-TV unit Mediaset Premium.

Telecom Italia's remuneration and nomination committee is meeting Monday and will give a recommendation to the board on the size of Mr. Cattaneo's exit package.

The executive is likely to walk away with a payout of about EUR25 million ($29.2 billion), according to a person familiar with the discussions. The amount will be dictated by the executive's contract that outlines bonuses linked to reaching specific financial targets, the person said.

Write to Nick Kostov at Nick.Kostov@wsj.com and Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

July 24, 2017 10:56 ET (14:56 GMT)

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