Patuano and Alierta: A tale of two CEOs

It seemed somehow fitting that the CEOs of two major European operators with what have been very strong ties quit their respective roles within days of each other. First, Marco Patuano of Telecom Italia resigned, with the operator this week confirming he is to be replaced by Flavio Cattaneo. Then Telefónica said long-standing CEO César Alierta is to step down after 16 years in this position. He is to be succeeded by José María Álvarez-Pallete.

The former Italian and Spanish incumbents still compete in Latin America, but their formerly strong link in Europe was ended when Telefónica sold its stake in the Telco holding company to Vivendi.

The irony is that Patuano has been forced out after disagreements with Vivendi over the Italian company's strategy, particularly with regard to Brazil. The French media group has gradually built up its stake in Telecom Italia since it acquired Telefónica's stake, and now holds almost 25 per cent.

Both operators have faced similar challenges: they are former incumbents in their domestic markets that have faced growing competition from rivals in both fixed and mobile services. They have grappled with mounting debt and declining revenue and also own important assets in Latin America.

The circumstances surrounding the departures of their respective CEOs could not be more different, but the injection of fresh blood in the upper management level comes at a fraught as well as an opportune time for both companies. While Telefónica has stuck with one of its own as its new CEO -- Álvarez-Pallete already held the post of COO and joined the group in 1999 -- Telecom Italia has chosen a relative industry outsider as its new CEO: Cattaneo is currently CEO of train operator NTV. However, he does already sit on the Telecom Italia board.

Both new CEOs face huge challenges. Bloomberg noted that Telefónica underperformed its peers under Alierta, while Patuano struggled to turn round Telecom Italia during his tenure. A big strategic issue will be Brazil, where both operators own companies and have been hard hit by the tough environment in this market. While Álvarez-Pallete already comes with a strong track record, Cattaneo will be under pressure to produce results, and quickly. Perhaps in Italy in particular, a change in the old guard could bring some much-needed alignment on strategy among shareholders and the top management.--Anne