Top shareholder Vivendi sees off another Telecom Italia CEO; de Puyfontaine takes reins on interim basis.
Outgoing TIM CEO Flavio Cattaneo gave his colleagues even more reason to miss him on Friday when the Italian incumbent reported yet another strong set of financial results.
His responsibilities have passed temporarily to Arnaud de Puyfontaine, CEO of top shareholder Vivendi, who became TIM chairman in June.
Cattaneo this week received a €25 million payoff following his agreement to leave TIM after finding himself in Vivendi’s bad books.
This prompted Total Telecom to trawl through its extensive archive and discover that Cattaneo is the latest in a string of TIM CEOs to leave under such circumstances over the last decade. So please join us for a quick ‘what happened’ and ‘where are they now?’
Riccardo Ruggiero – the last of the big spenders
Arguably the first CEO of TIM – then called Telecom Italia – in recent times to look for the exit amid a significant change of shareholder. Ruggiero led the company as it sought to expand across Europe, launching its Alice broadband service in various major markets including France, the Netherlands and Germany.
In late 2007, Ruggiero’s five-year tenure at the top came to an end when TIM’s then-controlling shareholder Olimpia finalised the sale of its stake to the Telco consortium, comprised of a group of Italian insurers and banks, as well as Spanish incumbent Telefonica. After much debate, the new shareholders agreed that a change of leadership was in order…
Franco Bernabe – a reign of reining it back in
Bernabe did not have it easy during his second stint as CEO of TIM. The company’s net debt stood at €35.7 billion when he took charge, and the financial crisis struck the European telecoms sector not long into his tenure.
TIM sold off various international businesses – including Alice France to Iliad, Alice Germany parent Hansenet to Telefonica, and Alice Netherlands parent BBNed to Tele2 – but held onto its Latin American assets in Argentina and Brazil, in a bid to shore up its finances.
During Bernabe’s time at the top, TIM’s share price fell by around 60%, and it was a difference of opinion between himself and shareholder Telco about how to keep the company afloat that led eventually to his resignation.
With credit agencies threatening to downgrade TIM to junk status, Bernabe hatched a plan to raise €5 billion by issuing new shares to help pay down debt. Telco, now led by Telefonica, which was in the process of buying out the members of the consortium, was pushing for further asset sales.
Marco Patuano – steadying the ship
Bernabe’s chief operating officer, Marco Patuano, stepped up in October 2013, initially as an interim measure before his appointment was made permanent.
Shortly after he took the helm, TIM agreed to sell its stake in Telecom Argentina to Fintech. It was not a simple sale though; the Argentine government twice blocked the $960 million deal on the grounds that Fintech lacked the necessary experience to run a telco. After a protracted negotiation, the sale was finally completed in March 2016.
Patuano also oversaw the IPO of TIM’s towers business, INWIT, in 2015, which raised €875.3 million. There was also rampant speculation over TIM’s future in Brazil, with Telefonica – parent of local rival Vivo and fixed-line player and former Vivendi unit GVT – expected to be the buyer.
However, TIM held onto TIM Brasil; meanwhile, Telefonica and its fellow members of Telco broke the consortium up, allowing each company to sell its TIM stake.
At the same time, Vivendi – which had taken an 8.3% stake in TIM when it sold GVT to Telefonica – sought to increase its position in TIM by acquiring more shares. By March 2016, Vivendi was TIM’s biggest single shareholder, with a stake of 24.9%.
That same month, it emerged that Patuano – who had been under pressure to reshape TIM’s strategy to fit Vivendi’s vision for a southern European-focused media outfit – was heading out the door.
Flavio Cattaneo – back in business
Cattaneo picked up where Patuano left off, seeing through a cost-cutting programme that had been ongoing when he took charge.
With a €40 million carrot dangling in front of him, Cattaneo also implemented an aggressive turnaround plan centred on differentiating on network quality in Italy, both in mobile and fixed, and on driving service revenue growth in Brazil.
TIM’s financials recovered dramatically, describing 2016 as its best year in Italy since 2007.
However, just as Patuano before him, Cattaneo’s fatal mistake was to seemingly get on the wrong side of Vivendi.
The cause of this falling out was Cattaneo’s dispute with the Italian government over TIM’s rural fibre deployment. Vivendi is currently having a dispute of its own with the government over its stakes in both TIM and Italian broadcaster Mediaset – in which it holds 28.8% – and is allegedly keen to avoid further antagonising the government.
Cattaneo’s departure was agreed at a board meeting on Monday.
On Friday, TIM reported first half revenues rose 7.4% on the first six months of 2016 to reach €9.77 billion. EBITDA was up 10.4% to €4.11 billion, and net debt stood at €25.73 billion, down from €25.96 billion at the end of 2016.
"I leave the company better than I found it," Cattaneo said, in a statement. "From the first quarter of 2016 to today, TIM has recorded growth of 9.3 percentage points in consolidated turnover, from -5.6% to +3.7%; 13.6 percentage points in EBITDA, from -7.5% to +6.1%, and the net financial debt has been reduced by €2.4 billion over the past 12 months."
Cattaneo’s will be a tough act to follow but until a permanent successor is found, de Puyfontaine will occupy the hot-seat.
"The results of the first six months of the year constitute a solid foundation for the second phase of the TIM relaunch plan that, I feel, will satisfy all the group’s stakeholders," de Puyfontaine said. "TIM will continue its investments in infrastructure, and in the development of converging services, and will further consolidate its technological leadership."