The months of tortuous negotiations at Telecom Italia appear to have finally taken their toll on the operator's CEO, Franco Bernabe, who is reportedly considering resigning at a board meeting due to take place on Oct. 3.
According to Reuters, which cited an unnamed source, Bernabe is ready to throw in the towel if his plans to raise money to cut debt and save the Italian company from falling into junk territory do not get sufficient backing. COO Marco Patuano has been floated as a possible interim CEO, reports said, while Bloomberg noted that Poste Italiane SpA CEO Massimo Sarmi is the candidate favoured by Telco, the investment vehicle that owns 22.4 per cent of Telecom Italia.
Bernabe was considering proposing to the board meeting a capital increase of up to €5 billion ($6.8 billion) to cut debt and fund badly needed investments, sources told Reuters last week. However, core investors are reluctant to invest more money into the company.
Telecom Italia and Telefónica representatives declined to comment, according to Bloomberg.
In addition, Bernabe opposes plans by Telefónica to increase its share of Telco and then possibly sell some valuable assets such as TIM Participacoes once it gains control. Telefónica and three Italian investors struck a deal this past week that could give the Spanish group full ownership of Telco.
The clash with Telco over investment strategy could be the final straw for Bernabe, Bloomberg said.
"Bernabe always knew that without the rebalancing of the capital structure of Telecom Italia there was no room for investments but only for asset disposals," Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan's Bocconi University, told Bloomberg. "This is why he is putting on the table his resignation."
It was further reported by Reuters this week that Telecom Italia and state holding company Cassa Depositi e Prestiti (CDP) are still far from reaching an agreement on an investment in the fixed-line network, which Bernabe had been hoping to sell off to raise funds. Other proposals to raise cash and increase efficiency include a sale of Telecom Italia's mobile towers and create separate companies for its domestic consumer and business services.
Bernabe told a parliamentary hearing last week that he has helped Telecom Italia reduce its debt burden by $11 billion since 2007, Bloomberg reported. However, as Bloomberg noted, Telecom Italia's market capitalisation of €10.6 billion ($14.4 billion) is now about a third of its net debt. Telecom Italia reported more than $38 billion in net debt at the end of June.
Bernabe has also presided over a period that has seen Telecom Italian reject potentially strong partners, including Hutchison Whampoa and Egyptian billionaire Naguib Sawiris.
Telecom Italia directors and politicians challenge Telefónica's plans
Telecom Italia fails to reach deal, reportedly mulls sale of mobile towers
Telecom Italia's future ownership remains up in the air
Report: Sawiris eyes Telecom Italia again
Report: Telecom Italia could face takeover bid this year