Tim: Elliott, direct attack on Vivendi. The bottom above 5%

The cards are revealed. The Elliott fund currently holds over 3% of Tim's common stock. A percentage which, added to "financial instruments" causes the fateful threshold of 5% of ordinary shares.

This is what can be read in the open letter to shareholders that the US fund published today, Friday 16 March, and which anticipates the usual communication to Consob, mandatory beyond this threshold. The letter is readable on the www.transformingtim.com, a site created ad hoc, within which Elliott will notify Telecom shareholders all future updates.

THE LETTER

Six pages in which Elliott explains his reasons, but above all underlines that "she doesn't intend to control Tim but to catalyze change that ensures the company is run for the benefit of all shareholders.”

Then again a reference to the board. In fact, the fund reiterates the need for “a truly independent board of directors to improve both governance and Tim's performance. “Based on our in-depth analysis – Elliott reiterates – we strongly believe that there could be a significant upside for shareholders if an independent board takes steps to improve Telecom's strategic direction and governance”.

We recall that Elliott has asked the company to include it on the agenda for the April 24 shareholders' meeting the revocation of the 6 directors representing Vivendi and the simultaneous appointment of six new directors of his recommendation: Fulvio Conti, Massimo Ferrari, Paola Giannotti De Ponti, Luigi Gubitosi, Dante Roscini and Rocco Sabelli

THE ATTACK ON VIVENDI

In the letter, the fund then goes on to list what they would be "the obstacles to value creation under Vivendi's leadership”. Clear, direct criticisms related to “substantial and persistent stock underperformance, strategic failures, management of corporate governance and conflicts of interest”. Not only that, the change desired by the fund within the board, according to Elliott, could correct the "persistent undervaluation of the stock which is undeniably present in Tim. As a shareholder, Elliotts says it is "excited that representatives" proposed to replace the members nominated by Vivendi have already expressed their willingness to "bring new perspectives and responsibilities to the board of directors"

The fund "seeks to play a positive constructive role in this process and act as a catalyst in Tim's return to value creation" and proposes a "structural transformation" aimed at simplifying the capital structure through the conversion of savings into ordinary shares, the spin-off and partial sale of the network, the partial or total sale of Sparkle. The last reference contained in the letter is the use of proceeds from disposals for debt reduction and the reintroduction of a dividend.

VIVENDI'S ANSWER

The French, for their part, do not intend to suffer unarmed. In a response statement, the giant led by Vincent Bollorè underlines how the plan presented by the Elliott fund for Tim “dismantle the group” and “destabilize the team”. 

Vivendi underlines that he is still the main shareholder of Telecom Italia with almost 25% of the capital and, by virtue of his position, undertakes to examine "with an open mind the indications presented by Elliott management, a hedge fund well known for its short-term ventures”. The very little veiled barb is followed by some considerations: "it is not certain that the plan to dismantle the group and destabilize the team will create value", observe the French, highlighting that the industrial plan presented by Amos Genish and his team is robust and promising for the future. “The initiatives taken in recent quarters have already produced results which have been well valued by investors”.

TIM REPLIES TO THE ANTITRUST

Meanwhile, on Friday the Antitrust imposed a maxi-fine on Tim of 4,8 million euros for incorrect advertising on the fibre, omitting the additional costs and the diffusion of the services on the territory. Here is the reply from the TLC: "Tim considers today's decision by the Antitrust Authority to be completely unfounded both in terms of merit and in the quantification of the fine, also in the face of the active collaboration that the company has shown throughout the procedure with the acceptance of the suggestions proposed by the Authority. The provision is damaging and prejudicial to Tim's image and interests and will therefore be challenged before the Lazio Regional Administrative Court”.