Telecom: an Italian story


The ‘share action’ initiative up to now has got 1750 people signed up representing about 4,800,000 shares. Thanks to this week’s L'Internazionale that has put me on the front cover. I’m publishing my article here. It’s talking about a story that for the moment has no finale. Let’s hope that it will at least be a finale that is sustainable, like Guido Rossi says that Telecom’s debt is. But if the debt is sustainable, what about the credit?

Tronchetti resigned as president of Telecom one Friday, a few minutes before eight in the evening, dinner time. In Milan it was raining, autumnal weather, no one was around because of the urban transport strike. Sadness was in the air. The voice of Aznavour was singing “Com’č triste la Borsa a Milano”{How sad is the Milan Stock Exchange}, but perhaps it was just an echo in the Galleria.

The next day, a resigned Tronchetti, no tie, was walking with his relatives in via della Spiga. In the evening in the most honoured position in the San Siro stadium, he received expressions of solidarity that were like condolences. Inter drew with Sampdoria and added a note of depression at the end of Tronchetti’s week that was almost surreal.
But in the tradition of the best detective stories, we need to ask the question: who is responsible for the fall of the unhappy Tronchetti? The name that jumped to everyone’s lips was that of Romano Prodi, because of his resemblance to a major-domo cyclist. The major-domo is the prime suspect.

However Prodi can be excluded as he is a person who as always does not know the facts, and what’s more with an adviser, Rovati, who by sending a hand crafted memo to Tronchetti has got the whole of the government into a mess.
The private, extremely private message, speculated on a reorganisation of the Telecom group and Tronchetti like a perfect businessman, one that relies on a handshake, straight away handed it over to il Corriere della Sera, the independent daily of the polite salon where Pirelli sits. Rovati resigned.
Prodi has to refer to the Lower House something that no one is sure what it is, but one of his eloquent silences could be enough if accompanied by the throwing of a tomato. Having excluded Prodi, who is left? To understand this we have to go back in time. To the time of dell’Ulivo and D’Alema.
The time of the privatisations, the time of the ‘captains courageous’, but those without a lira. Franco Bernabč had recently started his reign in Telecom Italia. He was a dignified ruler who had already shown his colours in ENI.
Telecom had practically no debts. And every day generated good money. Telecom owned companies and buildings, just to show you, it had the biggest fleet of company cars in Italy. This was a patrimony built up with the taxes of generations of Italians.
D’Alema, who was then President of the Council, for reasons that no human mind (and perhaps not even any alien mind) was able to understand, allowed the company to be hived off to the Colaninno-Gnutti duo. Colaninno let go of Omnitel and launched a takeover bid for Telecom.
The money from the sale of Omnitel was definitely not enough for the takeover, but it went ahead by taking the company into debt.
Thus a Telecom without debts found itself with debts up to its neck. Franco Bernabč who tried to oppose this move by supporting the merger with Deutsche Telekom, even with a serious confrontation with the merchant banker D’Alema, well known industrialist and economist, had to resign.
From this moment the outcome for the country’s biggest company, the one with the best industrial prospects, and the highest rates of innovation, was doomed.
Furthermore, the block sale of the backbone, fixed and mobile lines is a weight on the development of the telecommunications market.
In fact a true market cannot exist if the one possessing the network is also supplying the services. The network should have remained in public hands, or at least, should be subject to the control of the State with a major participation.
Colaninno and Gnutti, who know how to conduct business, try to reduce the debt by selling Tim, or at least by merging it with Telecom, an action that is 5 years ahead of Tronchetti’s actions, but they are not allowed to do this.
Anyway, Colaninno tries to set out an industrial plan that doesn’t even get the time to see the light. Berlusconi comes to Government and night falls for Colaninno.
In July 2001 Colaninno goes to Argentina for a hunting trip and Gnutti, noticing what’s in the air, takes advantage, meets up with Tronchetti and sells. Tronchetti had the cash from selling in 2000, (during the period of the speculative bubble) the division for telecommunication cables Optical Technologies to Corning of the United States, for the incredible sum of 7,000,000,000,000 in cash.
He shares 1,000,000,000,000 in stock options with Buora (200) and Morchio (300), with 450 for him. Tronchetti acquires control of Telecom with the system of Chinese boxes. This is basically a series of companies which has a tiny company at the top of the chain which controls a bigger one and so on down until you arrive at Telecom.
Tronchetti with 0.8 per cent of the shares (he’s the true small investor) finds that he is controlling an empire through Olimpia in company with Benetton, Gnutti, Unicredit and Banca Intesa.
However the debts remain. The new strategy to reduce them is simple. It’s that of the second hand dealer: sell and get rid of it. Seat, Telespazio, Finsiel, a part of Tim, and Telecom’s buildings are sold for cash. Many activities of the group are encapsulated and got rid of.
But this isn’t enough. The margins on the fixed and mobile phones get smaller and the debt does not allow for the necessary investments. There’s risk of an implosion, or the loss of control if new partners were to come into Olimpia.
Coming to 2005, Tronchetti merges Telecom and Tim with the latter being bought through a takeover. Telecom gets even more into debt but gets access to the cash produced daily from the mobile phones.
The operation is announced as strategic. An industrial strategy that lasts 18 months. Then there’s a return to the old. The fixed and the mobile are separated so that they can be sold in pieces; one or both isn’t known. Unicredit, Banca Intesa and Hopa leave Tronchetti to his destiny. Benetton devalues the Telecom shares that at the time they were bought in 2001 were valued at more than 4 Euro and today are worth half that.
Tronchetti kept the value of the shares at an affectionate value but finally he had to devalue them with a domino effect on the Pirelli group.
He resigns leaving 41,000,000,000 in debts. That’s not counting the bonds and the various pieces of paper (the IOUs to the investors), more or less the same as with Colaninno. But with a minus value as all the companies are sold off.
The guilty one is thus clear. It is the middle finger of the invisible hand of the market. The one that has hit all those who lost their jobs and their savings invested in Telecom shares. It is a finger that sees well. Very well. That’s why it takes no notice of managers and controlling shareholders, which is why Telecom has been a great business. The best in a lifetime.
For Parmalat the Guardia di Finanza {Finance Police}came to fetch me from Nervi. They wanted to find out how I managed to know all the facts. I took with me a folder on which was written Telecom to help them take their work forward.
They didn’t take me seriously. But of course that’s how it should be as I’m just a comic. This time I’m expecting Consob or the Stock Exchange to employ me. From comic to global financial consultant. I’ve decided to take the great leap.
To take control of Telecom without even forking out a Euro. A Genovese takeover. I have started the `share action` to ask the small investors if I can represent them. To go to the shareholders meeting and give a kick up the backside to the directors starting with the independents. Those who want to participate can do so through my blog.”

Posted by Beppe Grillo at 11:16 PM in | Comments (13)
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Sorry, wrong thread.....

Posted by: Enrico Rossi | September 28, 2006 10:24 PM

Most of our nightmares originate in the USA including this one. Land of the free, home of the brave and Lunatic Asylum as well.

Posted by: Enrico Rossi | September 28, 2006 10:22 PM

Is Italy sliding down Argentina's slippery slope?
All this treasure being stolen and most certainly shipped abroad must hurt the Country's ability to stay afloat.

Posted by: Enrico Rossi | September 28, 2006 04:26 AM

This Telecom thing is risking to be treated like the Ustica incident.

Everything behind a rubber wall, thank to complacent journalists and politicized media.

Posted by: Giovanni Principe | September 27, 2006 11:04 PM

GUYS, if you want to comment in ITALIAN, you have your italian side of this blog. Do not use this space for your useless italian comments: AVETE CAPITO ??

Posted by: Guido Rossi | September 27, 2006 04:45 PM

Ciao Beppe,

dai emigra qua in Inghilterra per un fine settimana a Londra e dintorni che ci beviamo un caffe' insieme!!!!!!!!!!!!!o un te come vuoi.

Un abbraccio e grazie ancora per il tuo blog.Informativo come sempre.

Posted by: enrico maure | September 27, 2006 02:21 PM

Sacré D'Alema... Massimo "The Boat" D'Alema... Sempre lui... Ormai č diventato a tutti gli effetti l'Andreotti della "nuova repubblica"... Ovunque c'č uno scandalo, affari, coperture, banche prima o poi viene fuori il suo nome, adesso apprendiamo grazie a Grillo che ha messo il suo baffetto anche in Telecom... C'č solo da sperare che prima o poi finisca in una tormenta e che uno squalo peggio di lui se lo porti via.

Posted by: Alberto Riccardino | September 27, 2006 11:12 AM

This time I will not comment on the actual article, I will only say that many times, cases and events discussed on this blog are so VERY SIMILAR, IDENTICAL to those happening in Greece that are almost a COPYCAT...!!!
It's either Greece has risen to the European level or Italy has dropped to the Balkan level...???(!!!)

Posted by: paola filinesi | September 27, 2006 09:53 AM

Joselle, so it is not just me - Beppe's actions have not made it to the TV, yet. This is not at all uncommon in Italy where what the media can or can't talk about would appear to be decided by those who represent certain 'interests'. This happened a lot while the B man was in power, Mr P does not appear to be much different, although Mr P will not know as many media people as Mr B does.

Posted by: Alex R | September 27, 2006 08:20 AM

Another point why I think the Italian mass media in general, especially TV, are keeping silent on his "takeover" campaign is to avoid giving publicity to it. People are more likely to watch the news on TV than to go to a blog site.

Pity, really, when you consider that there is more truth in information you can obtain on internet than on the news that local stations want to feed you.

Posted by: Joselle Camilleri | September 27, 2006 07:32 AM

Beppe's campaign has not, so far, made it to the news. You see, with all the troubles ekeing out of every pore of Telecom and the other "tangenti" and issues of serious political effect, the media concentrated ONLY on "calciopoli", ignoring the existence, political, social and financial, of the doom of Telecom.

You know, THAT is why some countries never suffer a revolution. Feed the masses ONLY the food of the masses. For some time the concentration was on Parmalat and Tanzi, then on Wanna Marchi and her daughter's embezzling, then Calciopoli, and ONLY now we get to hear of Tronchetti's apparent mess but we are not allowed, somehow, to understand who is the real culprit behind this mess. We are just offered a scapegoat, another lesser scapegoat and the mumbled, undeciphrable phrases of the Premier.

Of course, this is the same recipe everywhere in the world. Mass Media make you and then break you. See how they first exalted and, now, kicked Tony Blair in the ass, for example. The golden wonderboy found himself transformed into some kind of monstrous alien. This is the age-old story over and over again.

Posted by: Joselle Camilleri | September 27, 2006 07:29 AM

Beppe,I am waiting to see the government respond to your "share action",they are going to came up withy some new law to stop you,and everybody like you that want to do something about it,you got my moral support,good luck ciao

Posted by: evakulnura | September 27, 2006 12:37 AM

How odd. Not. I don't remember hearing that Mr Grillo has the best part of 2000 people giving him the right to administer their Telecom share voting rights on the Italian TV news. Maybe I just missed it. (This is possible) Anyway, I'll keep an eye out for The Economist - they'll have a field day with this!!

Oh and Mr Grillo - I do hope you have an army of 'tax-deductible' body guards. After Parmalat they got their knives out. With this Telecom lark they might just start sharpening them....

Go for it Mr Grillo - but Fŕ balŕ i oeuc, as they say in Milan.

Posted by: Alex R | September 27, 2006 12:16 AM

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