Vivendi wins four seats on Telecom Italia's board

By Agnieszka Flak and Stefano Rebaudo

ROZZANO, Italy (Reuters) - Top investor Vivendi (VIV.PA) stamped its authority on Telecom Italia (TLIT.MI) on Tuesday by winning a vote to appoint four representatives to the board, while also blocking a share conversion plan that would have diluted its 20.5 percent stake.

Despite opposition from many investment funds that are big shareholders in the Italian group, Vivendi managed to push through at a shareholder meeting its proposal to be given four seats on the board by increasing the number of directors to 17 from 13 currently.

Vivendi's representatives are now expected to take their seats at a board meeting on Wednesday, Telecom Italia's chairman, Giuseppe Recchi, said.

The French media group led by chairman Vincent Bollore, had earlier abstained from voting at the meeting on a plan to convert 6 billion savings shares into ordinary stock, which would have diluted its own stake by about 30 percent.

As a result the board-backed proposal failed to get the two-thirds majority of votes cast by shareholders present at the meeting.

Vivendi's proposal for board representation only needed a simple majority to be approved, and it was backed by 53 percent of shareholders attending the meeting, meaning Vivendi found support for its cause among other investors.

The only point on which Vivendi was defeated was in its request for a non-competition clause to be waived for its representatives, three of whom are top executives at the French group. However a Vivendi source said this was a matter of form rather than substance.

Proxy shareholder advisers had recommended that investment funds who own 65 percent of Telecom Italia vote against Vivendi's proposal, saying four board seats would give it too much influence in view of the share conversion plan.

However, Vivendi Chief Executive Arnaud de Puyfontaine had compared Telecom Italia to a "rudderless ship" as long as its board did not reflect the current shareholder base.

Vivendi has invested more than 3 billion euros in building up its shareholding this year after taking an 8.24 percent stake off the hands of Telefonica, the Italian firm's former biggest shareholder, in part-payment for selling its Brazilian company GVT to Telefonica Brasil (VIVT3.SA).

The defeat on the conversion could be treated as a vote of 'no-confidence' in the current board and management, and will inevitably raise questions about how long it can survive, even though it has a mandate to stay in office until April 2017, sources familiar with the matter said ahead of the vote.

Telecom Italia's board approved the proposal to convert the savings shares last month in a move to help it raise cash.

But it would have also diluted Vivendi's stake as well as the potential stake held by billionaire French entrepreneur Xavier Niel, founder of low-cost telecoms group Iliad (ILD.PA), who recently bought call options relating to 15.1 percent of Telecom Italia's equity.

De Puyfontaine said at the meeting that while his company supported the conversion plan, it wanted more discussion on the terms, given the dilutive effect on its holding.

"We are sorry because we are missing an opportunity for the company ... but now that we have them on the board we will study the plan in the future, whenever the opportunity arises again," Recchi said after the meeting.

Feeling the heat, he had earlier defended his board's preformance, saying that under its watch shares in Telecom Italia have risen 40 percent.

However, much of that gain has been made on the back of speculation about the recent stake-building by Vivendi and Niel, at a time when telecoms network operators are consolidating in various national markets in the quest for economies of scale, as demand grows for faster and converged fixed and mobile services.

Niel, who met Italian Prime Minister Matteo Renzi recently for a private discussion, only said in a recent filing with the U.S. Securities and Exchange Commission that as an investor via the call options he might want to have a say on Telecom Italia's future strategy and deals.

Neither Bollore nor Niel have spelled out where they think Telecom Italia might be heading in terms of industry consolidation.

However, De Puyfontaine told Corriere della Sera newspaper on Monday that he did not believe French group Orange (ORAN.PA) could be a merger partner for Telecom Italia, despite persistent market talk of a possible tie-up.

(Writing by Silvia Aloisi; Editing by Greg Mahlich)