Flavio Cattaneo Named CEO of Telecom Italia -- Update

By Manuela Mesco

MILAN--Italy's largest telecom operator Telecom Italia said on Wednesday that it has appointed Flavio Cattaneo as the firm's new chief executive.

Mr. Cattaneo will replace Marco Patuano, who resigned earlier this month over clashes with Telecom Italia's board and its largest shareholder, French firm Vivendi, which has built up a 24.9% stake in the Italian company.

The board's decision to appoint Mr. Cattaneo is a step toward a much-needed turnaround for Telecom Italia, according to a person familiar with the matter, after years of declining revenues and high debt.

The telecom operator has struggled with a lack of a clear strategic direction able to cope with the twin challenges of a protracted economic downturn in Italy and harsh competition that has sent prices spiraling downward in the domestic market, which accounts for most of the group's business.

According to the person, the need for a turnaround became evident in recent months, as the board grew more and more disappointed with the former chief executive's approach.

But Mr. Patuano--who has been the company's chief executive since November 2013--was able to keep such tensions under control until recently. Clashes became more open after Vivendi gained four seats in Telecom Italia's board in December and started to exert a stronger influence in the boardroom.

The main causes of tensions were around the poor results for Telecom Italia--which in 2015 had one of the worst performances in the European telecom sector--and the way regulatory issues were dealt with, the person added.

According to Vivendi, the way the Italian company dealt with regulators and authorities was unacceptable: Telecom Italia was recently fined for unfair competition behavior and regulators themselves said that a change in the way regulatory issues were dealt with was needed.

Another person familiar with the matter also said previously that Vivendi had been pushing for stronger cost-cutting measures and to address Telecom Italia's strategic challenges, such as selling the company's Brazilian unit.

Now, with a new CEO on board, the strategy outlined by Mr. Patuano in February will remain in place. The former CEO announced back then that the company will increase investments in the Italian network, totaling EUR12 billion during the three-year period ending in 2018.

But the new chief executive will work more closely with the company's chairman, Giuseppe Recchi, and will make strategic adjustments if needed, the person added.

The company also said Wednesday that Mr. Recchi will have more powers than before, among which will be a stronger control of network security issues, as requested by the Italian government, which wanted a guarantee that the network--regarded as a sensitive asset, because of the information accessed though it--would be controlled by a trusted person, a person familiar with the matter said.

One of the people familiar with the situation said that Mr. Cattaneo, 52 years old, was chosen by Mr. Recchi who spent the past week trying to convince him to take the role. He has been chosen for his experience in media companies and because he has worked in companies where the business is subject to regulatory issues, such as Terna, an electricity operator. In his latest role as Chief Executive for train operator NTV SpA-Nuovo Trasporto Viaggiatori, he's also shown ability to turn a business around quickly, the person added.

In 2015, Telecom Italia posted a EUR72 million ($81.6 million) net loss also due to nonrecurring charges. Revenues fell 8.6% compared with 2014, to EUR19.7 billion, while Ebitda fell 20%. Domestic Ebitda, nearly 80% of the total, also declined 20%.

Write to Manuela Mesco at manuela.mesco@wsj.com

(END) Dow Jones Newswires

March 30, 2016 12:22 ET (16:22 GMT)

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