Telecom Italia is sticking to its guns on the logic of its planned share conversion, despite the fact that biggest shareholder Vivendi has indicated that it will abstain from voting on the issue.
The savings share conversion plan is in the interests of Telecom Italia as well as holders of its ordinary and savings shares, the Italian incumbent insisted on Saturday.
"The board deemed it advisable to finalise the conversion proposal, which had been thoroughly considered in recent months, in a market situation that appeared particularly favourable," the telco said, in a statement, adding that the plan "was met with widespread appreciation from financial analysts."
It was forced to defend the plan after Vivendi said it would abstain from the vote scheduled for later this week. Vivendi has questioned both the fairness and the timing of the plan.
Without Vivendi’s support, Telecom Italia will likely struggle to gain approval for the plan that it unveiled in November. The plan would see holders of savings shares pay 9.5 euro cents per share to convert to an ordinary share.
As Berenberg analysts pointed out at the time, the plan makes sense from a financial perspective, but shareholders like Vivendi and French businessman Xavier Niel would see their stakes diluted as a result.
Vivendi said it "is not convinced that the cash payment of 9.5 euro cents required to convert a saving share into an ordinary share is fully justified." The plan is in the interests of holders of savings shares, but not ordinary shareholders, it said.
Vivendi also said it "does not feel that there is any urgency," in carrying out the share conversion.
"Vivendi believes that the decision to propose a savings shares conversion plan should rest with a board of directors that best represents the current shareholders of Telecom Italia," it said.
That last comment is clearly a thinly-veiled reference to Vivendi’s desire to increase the size of the Telecom Italia board by appointing four new directors of its own choosing. That proposal is also due to be put to the vote at Tuesday’s shareholder meeting.
Since making that proposal in early November, Vivendi has been forced to defend itself against opposition from other investors, who fear that the French firm would be over-represented on the Telecom Italia board if they acquiesce to the proposal.
With Vivendi’s proposal appearing to lack the support it needs to pass, it seems the company is using the share conversion issue as leverage. It remains to be seen whether the various investors will reach a compromise before the meeting.
