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Telecom Italia loses CEO after KKR supply within the boardroom

© Reuters. FILE PHOTO: The Tim logo can be seen at its headquarters in Rome, Italy on November 22, 2021. REUTERS / Yara Nardi / File Photo

By Elvira Pollina

MILAN (Reuters) – Telecom Italia (TIM) lost its fourth CEO in six years on Friday after Luigi Gubitosi surrendered his powers after a clash with top investor Vivendi (OTC :), two sources told the matter to be close.

Gubitosi relinquished his responsibilities on Thursday and said in a letter from Reuters that he did not want to stand in the way of the board of directors to immediately consider a $ 12 billion takeover proposal by the US fund KKR.

TIM's board of directors turned Gubitosi's powers over to Chairman Salvatore Rossi at a meeting on Friday, while TIM Brazil's chief Pietro Labriola was named director general, the two sources said.

The board of directors of Italy's largest telecommunications company also discussed the threat to revenues from a football rights deal that failed to support revenues and contributed to two profit warnings.

TIM's disappointing results have strengthened Vivendi's hand in ousting Gubitosi, who was brought in by rival TIM investor Elliott in 2018.

Gubitosi has not stepped down as director, the sources said, preventing Labriola from joining the board and being named CEO, adding that the meeting was still ongoing.

STALLING

In his letter to the board of directors, Gubitosi criticized the directors for stalling KKR's offer to please some shareholders.

He rejected speculations that he was close to KKR and called on the board of directors to grant the New York fund access to company data and to appoint advisors.

TIM's board of directors examined KKR's non-binding proposal for the first time on Sunday to make him private on a € 33 billion deal, including debt.

The offer followed a downgrade of TIM's debt, which drove them further into junk territory a week ago, which two sources said sped KKR's decision as TIM is at risk of violating banking agreements.

Auditors have raised new concerns about the € 1 billion deal Gubitosi struck with DAZN to stream Italy's top football games, two other sources close to the matter told Reuters.

One of the sources said that a further downgrade in TIM's financial outlook cannot be ruled out, which would mean another blow to the holders of their debt, which would already be around four times TIM's core earnings.

STRATEGIC ASSETS

The duel between Gubitosi and Vivendi is the latest board crisis at TIM, which has had three CEOs since 2015, when the French media group started building its 24% stake.

Gubitosi brought KKR on board for the first time last year and signed a 1.8 billion euro deal that gives the fund a 37.5% stake in TIM's so-called last mile network, which extends into people's homes enough.

The takeover bid for the entire TIM comes as Italy prepares to spend € 6.7 billion of the European Union's reconstruction fund to accelerate ultra-fast broadband rollout across the country.

TIM's landline, slated for fiber upgrade by the government, is Italy's main telecommunications infrastructure, and Rome has announced that its response to KKR will depend on plans for the network.

Rome has special powers to block action against strategic companies like TIM, but Prime Minister Mario Draghi's executive branch has welcomed KKR's interest as good news for Italy.

Sources said KKR, which consulted the government before making its offer, plans to spin off the network and give state investor CDP – currently TIM's second largest shareholder – a lead role in oversight.

($ 1 = 0.8874 euros)

(Additional reporting and writing by Valentina Za; editing by Alexander Smith, Susan Fenton, Elaine Hardcastle)

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