The CEO of Italian operator Telecom Italia Mobile (TIM) packed up his desk and left the company this week after just 16 months. The decision was apparently by mutual consent following completion of an “extraordinary turnaround,” but Vivendi’s tightening influence on TIM suggests that everything is far from hunky dory.
The journey of Vivendi in its pursuit of European greatness is never short of drama. Bolloré’s French mass media giant is now infamous for its aggressive takeovers and proceedings of ousting executives. This is by no means a pretty way to do business, but is an effective way of bulking up its media and technology assets for its long awaited continent-wide TV ambitions.
Vivendi has made such a move this week, with plans to launch a joint TV channel through TIM and its French pay TV subsidiary Groupe Canal, according to reports from French news outlet Les Echos, following the recent approval of Vivendi’s controlling stake in Telecom Italia. The service will be an Italian version of Canal+, offering sports and entertainment content, plus investment in original series to come further down the line, although there have been no suggestions yet for delivering the new channel over the top (OTT).
Canale Italia will therefore go up against the struggling Italian pay TV business Mediaset Premium which Vivendi was on the cusp of acquiring from Berlusconi’s Italian broadcaster Mediaset just months ago. This takeover fell apart in a very public spat, for which the lawsuits are still ongoing, and the launch of a competing service from Vivendi is a firm twist of the knife in the wounds left in Mediaset by its last minute withdrawal.
Reports initially emerged earlier this week of a fallout between TIM CEO Flavio Cattaneo, who is set to collect a severance package in the region of €30 million ($35 million), and executives at TIM’s parent company Vivendi, which now holds a 23.9% stake. TIM then confirmed that the departing CEO would be doing so on a mutual basis and reaffirmed that he was responsible for driving the company towards record revenues and customer numbers, and TIM will continue on its road map towards “a conventional company relaunch that pursues the targets set by Flavio Cattaneo.”
This success story is really a half truth. While TIM’s net revenues for the first quarter of this year grew 8.5% year on year to €4.8 billion ($5.6 billion), with a 23% profit increase to €865 million ($1 billion), its fixed line business is still shedding subscribers – losing 105,000 accesses in the past year. Unfortunately, TV figures are no longer broken out, but the company target for TIM Vision, its paid TV platform available to mobile subscribers was 550,000 users by the end of 2015, while TivuOn, its internet TV joint venture with broadcasters Mediaset and RAI, was expected to have over 3 million subscribers by the end of 2016.
Six separate sources were cited in a Reuters report claiming that Cattaneo’s departure was triggered by a clash with Vivendi, while local news outlets blamed the appointment of Vivendi’s chief convergence officer, Amos Genish, as TIM’s new managing director as the deciding factor. Cattaneo’s predecessor as CEO of TIM, Marco Patuano, also left the company amid apprehensions of Vivendi’s business activities. The running theme here does not require extensive detective work.
Meanwhile, unnamed sources close to Vivendi have pointed to TIM’s recent broadband scandal with the Italian government as a crucial factor in the board’s declining confidence in Cattaneo. Faultline Online Reporter covered this in detail earlier this month, highlighting that TIM’s neglect of broadband infrastructure in Italy is no secret and it has instead focused on cheaper wireless investments.
The investigation applies to the roll out of superfast broadband in rural areas, where the Italian operator is accused of abusing its dominant position by attempting to stall deployments, for example by juggling investment plans. In addition, Italian market competition agency AGCM alleges that TIM has snapped up areas of opportunity for competing operators with the allure of preemptive, low-price broadband contracts.
At the start of June, the takeover of TIM by Vivendi received approval from the European Commission, following Vivendi’s agreement to give up Telecom Italia’s stake in Italian media company Persidera. The Commission stated that the agreement “would not significantly reduce competition in the European Economic Area or any substantial part of it, including Italy.”
One anonymous source stated this week that “replacing Cattaneo comes at a time when Vivendi feels it needs to adjust its strategic direction and start investing again in Italy.”
Despite Vivendi’s bad boy reputation, we feel that it has a more proactive way of doing business that will drive OTT opportunities and create competition – an area where Italian players have been sluggish.