Telecom Italia takeover: will the government’s ‘golden power’ still be enforceable?



At the moment of privatisation in 2000, upon losing its majority control by virtue of the dismissal of the equity participation held in Telecom Italia, the Italian government modified the company’s articles of association in order to ensure the recognition and possible exercise of a “golden share” held by the Treasury.

Possible risks and challenges were entailed in introducing special powers in a commercial enterprise (albeit recognised by national law). The issue was to match the special powers envisaged by privatisation law no. 474/1994 with contending fundamental EU principles, such as the freedom of enterprise and residence and the circulation of services and goods within the EU. The fact is that, at the moment of government loss of control in Telecom Italia, the special powers envisaged by privatisation laws nos. 332/1994 and 474/1994 were challenged by the EU Commission before the EU Court of Justice (EUCJ), and the decision was issued in the midst of the equity dismissal in May 2000.

This EUCJ decision found the national laws were not compliant with applicable EU regulation, following which the Italian parliament was forced to modify the general legislation in 2003 (Law no. 350), specifying again the strategic sectors in which special powers may be exercised (defence, transport, communications, energy and public services), but eliminating the previously recognised possibility of introducing special powers for generic industrial activities affecting “national objectives of industrial and economic interest”.

Noting the significant amount of time between such events and Vivendi’s recent takeover of Telecom Italia now certified beyond any legal doubt by Consob, the Italian version of the US Securities and Exchange Commission (SEC), with an opinion released overnight on 13 September 2017, taking into account Vivendi’s current equity stake of 23.9 percent in Telecom Italia we may opine whether the ‘special powers’ envisaged by law may be ever exercised by the Italian government in the case at hand.

As a preliminary note, we must keep in mind that Vivendi’s ‘Italian campaign’ also involved the media industry, and that the French operator acted in parallel, acquiring a 30 percent stake in Mediaset, the private media conglomerate. This acquisition has been challenged by Silvio Berlusconi (a major equity holder in Mediaset) before the Italian Communications Authority Agcom, following an alleged violation by Vivendi of a joint venture agreement between the parties.

On 18 April 2017, Agcom stated that the violation by Vivendi of Italian antitrust media pluralism principles assumed that Vivendi held a dominant position in the combined market. It is important to note that Agcom – similarly to Consob in its opinion of 13 September with respect to the equity stake held in Telecom Italia – identified Vivendi’s stakes in both Telecom (23.9 percent stake) and Mediaset (29 percent equity), highlighting the detrimental effects of such influence in the markets and imposing limitations on Vivendi.

In reply, Vivendi proposed a blind trust for equities in excess of 10 percent of the stake held in Mediaset, and rejected the opinion that it had control over Telecom Italia. Having been bluntly disavowed by Consob on this latter point, with respect to the exercise of special powers by the Italian government, this requires preliminary notification of an existing control by the acquiring party, and Vivendi never informed the government (contrary to all well-informed opinions on the matter) of its acquisition regarding Telecom. This circumstance could itself trigger sanctions.

Vivendi is now compelled to inform the government of the acquired control, given Agcom’s and Consob’s conclusions, and decide on whether to exercise powers, which has never occurred.

The only precedent arose in 2007. For reasons yet to be clarified, the possible exercise of the ‘golden power’ was not addressed in any way when Telefonica d’España – a direct competitor of Telecom Italia in the international wholesale market – acquired a significant stake in Telecom Italia’s holding company.

Powers may be exercised on targeted companies where the relevant articles of association have been modified to create such powers. This is true to some extent, as the law permits imposing modifications on a target company active in ‘strategic markets’. As the current case of Telecom Italia clearly demonstrates, some MPs are currently invoking powers on Telecom Italia Sparkle, the international carrier of the group, rather than on the privatised holding company, demonstrating that the former modification of articles does not necessarily limit eventual government intervention. It may occur at any time and may trickle down from lost control in controlling entities.

The case is further complicated by the parallel Italian takeover of French STX SA by Italian Fincantieri in July, following a public tender. Upon takeover, president Macron dismissed prior engagements between involved governments and nationalised STX, despite the successful bid of the Italian public conglomerate active in naval construction and defence.

The link between the two operations appears clear, as minister of economic development Carlo Calenda simultaneously ordered a preliminary investigation on Vivendi’s takeover and duty to notify. In order to justify its golden powers, the government should first identify the “serious prejudice to strategic interests” triggered by the takeover, for instance the public interest relating to the safety and operation of networks and systems. The fact is that not all fixed networks are operated by Telecom Italia, with respect to mobile and satellite infrastructure. Also, with reference to energy, transport and communications companies, vetoing the acquisition of control participations may be opposed only in the case of investors from outside the EU, which is clearly not the case here.

It may well turn out that, 10 years after Telefonica’s phantom takeover, the ‘golden share’ will return as a topic of debate in theoretical law or, more likely, a subject in political exchanges.


Fabrizio Cugia di Sant’Orsola is a partner at Cugia Cuomo & Associati. He can be contacted on +39 06 9603 8100 or by email:

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Fabrizio Cugia di Sant’Orsola

Cugia Cuomo & Associati

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