Il management of Telecom Italia rejects the plan presented by American fund Elliott for the company. In a written document for investor meetings e posted on Tim's site, we read that all the proposals put forward by the US fund, starting with the "significant reduction of the current perimeter" of the company, "have already been carefully analyzed by management and, with the exception of potential strategic options for Sparkle, have not been included in the Strategic Plan because they are mostly considered premature or unfeasible".
Furthermore, the document continues, “in the current context and with the current regulatory framework, the implementation of such initiatives would present significant complexities and significant financial implications".
One of the primary objectives of the Strategic Plan “is to strengthen Tim's operational and financial profile – continues the text – preparatory to Tim's return to an Investment Grade rating; the achievement of this objective could be compromised by potential asset disposals and the premature distribution of dividends to shareholders”.
as to network, the strategy of legal separation while maintaining 100% control is deemed "the most appropriate", but management says it is "available to evaluate further actions, such as the possibility of selling a minority stake and/or participating in a consolidation process of the Italian fiber optic infrastructure market", without however questioning "the maintenance of control and full consolidation" of the network.
About one merger between Tim Brazil and a local operator like Oi, the management notes that the transaction "could lead to additional financial pressure in the short term for Tim, given the financial profile of Oi, and consequently would jeopardize the success of the strategic plan".
And precisely that plan, approved on 6 March by the Board of Directors for the three-year period 2018-2020, "is the best path for the industrial development of the company and for the creation of value for its shareholders with consequent expected appreciation of the title”, continues the document, later clarifying that “the implementation of the strategic plan is proceeding in line with expectations”.
The management assures that “it will consider proposing to the board of directors the reintroduction of a progressive policy of distribution of ordinary dividends once the company has met the investment grade rating requirements. Management expects this to happen within the time horizon of the strategic plan”.
Coming to the possible conversion of savings shares into ordinary shares, it is an eventuality that "is monitored and evaluated on a recurring basis by management pending the occurrence of the right conditions". In any case, the final decision on the conversion rests with "the Board of Directors and Tim's shareholders".
Finally, the luxury subsidiaries. A further reduction of the stake held by Tim in Inwit “it will have to be evaluated in relation to the strategic and financial benefits and possibly carried out under the right conditions”, but the operation would in any case have a limited impact on the rating metrics.
For Sparkle, "the competitive position" of the submarine cable company "and the legislation on 'golden power' will have to be carefully considered in evaluating potential strategic options", but management "is already evaluating options in this regard".
At the end of the morning the share on the Telecom Italia Stock Exchange gains 0,8%, to 0,8448 euros, while the Ftse Mib travels around parity.
Read also: Tim: Consob moves, Vivendi attacks
SECURITY UPDATE TRAINING
Glass Lewis recommends voting for the list of directors for the Telecom Italia board proposed by Elliott at the May 4 shareholders' meeting. In a note to customers, the proxy advisor, who had already expressed the same in view of the meeting of April 24th, underlined that the calling of the meeting of next May 4th "is a clear demonstration of Vivendi's manipulation of Telecom, having been caused by the en bloc resignation of directors appointed by the French group. We believe that (Elliott's) slate is far superior,” argues Glass Lewis, underlining that the composition could keep Vivendi's influence under control and favor the interests of all Telecom Italia shareholders. The proxy advisor, on the other hand, advises abstaining both from voting on the number of years in which the directors will remain in office (although he believes that the best option would be annual renewal) and on the number of board members.
The company points the finger at the fact that the directors' resignations 'are far from reflecting a mea culpa for Telecom Italia's mediocre governance, lackluster performance and a questionable influence of Vivendi on the work'. On the other hand, Glass Lewis speaks of Vivendi's “far from skilful hand”. In short, sums up the company, the en bloc resignations of the directors triggered the forfeiture of the board and therefore the convening of the assembly on May 4th for the renewal of the board.
"In short - the recommendation continues - we believe that it is in the interest of all independent shareholders to counter Vivendi's influence as much as possible". The company therefore advises also to abstain from voting on the number of years of duration of the board.
"We are generally in favor of the annual board election - it continues - and we believe that the interests of shareholders are served if they are allowed to express support or disapproval of the board's actions through the annual election of company directors . However we note that under Italian law, directors can be elected for a term of up to three years and it is common practice for Italian companies to elect their directors for the maximum term permitted by law. While we believe the time limit is reasonable and in accordance with Italian law, shareholders should be aware of this. Indeed, proposals regarding the size of the board will be presented at the meeting by investors, including Vivendi. In light of the contested nature of this meeting, we do not believe supporting this proposal is in the interests of shareholders."
Lastly, it is worth mentioning the latest news on the legal front: the hearing in the court of Milan has been set for Friday 20 April on the urgent appeals filed by the Telecom board of directors and by Vivendi against the decision of the company's board of statutory auditors to accept the requests of the US fund Elliott to integrate the agenda of the Telecom assembly on April 24th. The judge's decision is expected on Monday, just on the eve of the meeting. The lawyers of Telecom, Vivendi and the board of statutory auditors will participate in the closed-door hearing.
