Betting on Bollore

Bollore's tilt at Telecom Italia board is too cheeky

Vincent Bollore's tilt at Telecom Italia's board is too cheeky. The French tycoon wants four seats for his representatives, the Italian group said on November 15. But this looks like bad governance, and it would be a gamble for other shareholders to back him.

Bollore's move to appoint directors to Telecom Italia's board isn't in itself a surprise: as the man who controls French media group Vivendi, he is Telecom Italia's largest shareholder. Still, it looks like creeping control, and gives Vivendi an outsized say. Vivendi's four directors would give Bollore an effective 23 per cent of the board. Yet his actual stake is just 20 per cent. That may fall to 14 per cent once Telecom Italia completes a conversion of 'savings shares' to the ordinary kind.

There are other oddities. Three of the new board members are senior executives at Vivendi, with potentially rival interests to Telecom Italia's own, and one has worked in the past with the French group. One existing Telecom Italia board member, Tarak Ben Ammar, is a member of Vivendi's supervisory board. As if that wasn't enough, the resulting board will have an unwieldy 17 people on it.

The move shows Bollore's clear intent to shake up Telecom Italia, but his precise motive remains unclear. Meanwhile Xavier Niel, owner of mobile group Iliad, has also been building a Telecom Italia stake through options. Telecom Italia risks becoming a plaything of the two Frenchmen.

Bollore still needs other shareholders to play along. His 20 per cent stake may not be enough to drive the proposed board appointments through if more than 40 per cent of Telecom Italia shareholders show up to a meeting next month.

At least Bollore's track record is not bad; Sanford Bernstein estimates that he has generated internal rate of returns ranging from six per cent to 100 per cent in past investments. And there may be a chance to create value at Telecom Italia, which is indebted, and trades at a discount. Yet until he says what he wants to do with Telecom Italia, there's not an obvious reason for shareholders to give him the benefit of the doubt.