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MILAN, March 23 (Reuters) - Vivendi has succeeded in shuffling the cards in a stand-off over Telecom Italia with Elliott, rattling the activist fund by forcing shareholders at the Italian phone operator to vote on an entire new board.
But no clear indication of who is likely to end up calling the shots at Italy's biggest phone group is likely to emerge for at least a couple of weeks.
Eight Telecom Italia (TIM) board members nominated by Vivendi, its top investor, resigned on Thursday, setting off a full board renewal. Shareholders will vote on the matter on May 4.
The move is seen as a bid to pre-empt attempts by Elliott, which has built a potential 5.74 percent stake in TIM, to challenge the way Vivendi runs the group.
Elliott slammed the maneuver as "cynical and self-serving".
"The board has simply abandoned their posts to stall for time," Elliott said in a statement, adding that this did not come as a surprise given "the momentum behind Elliott's campaign at Telecom Italia to improve both performance and governance".
Vivendi had no comment on Elliott's statement.
Earlier this month, Paul Singer's fund had called for six Vivendi-nominated board members, including TIM Chairman and Vivendi CEO Arnaud de Puyfontaine, to be replaced to improve governance and strategy at the former state phone monopoly.
Some analysts said Vivendi's action showed the French group, which owns 24 percent of TIM, took Elliott's threat seriously.
"We believe that Elliott (and supporters) remain well-placed to ensure that Telecom Italia's board post-May 4 will not be Vivendi-controlled," Jefferies said in a note.
The Italian phone incumbent has lost more than a third of its market value since Vivendi first took a stake in mid-2015.
Vivendi eventually appointed two-thirds of its board and named its own chief executive as TIM executive chairman, raising concerns among other shareholders and politicians in Rome who consider the company of strategic national importance.
Shareholders have until April 9 to present their slates.
The one winning the most votes will secure two-thirds of the board while the remaining directors will be appointed from the other lists.
Vivendi's move is seen as a way of driving a wedge between Elliott and institutional investors, who now have to choose whether to back the activist fund, to follow Vivendi or whether to present slates of their own.
TIM Chief Executive Amos Genish, whose new three-year strategy was well received by investors, will likely feature in Vivendi's list, a fact that might help win support for the French side.
Vivendi is effectively shifting the focus away from governance issues by asking shareholders to support Genish's strategy plan, said Berenberg analyst Nicolas Didio.
With its 24 percent stake, Vivendi can ensure it will gain at least some representation on the board rather than lose all seats "which might have happened had the vote only been about replacing six directors", Didio added.
Elliott has written to other shareholders calling for a "truly independent" board saying that "poor stewardship" under Vivendi had depressed TIM's value and led to "deeply troubling corporate governance issues".
Some institutional investors have expressed concern over Vivendi's leadership, especially after two CEOs quit in less than two years. But most also approve of Genish, despite him being an ally of Vivendi Chairman Vincent Bollore, because of his track record as a telecoms veteran and dealmaker in Brazil.
Whether TIM will end up with a more independent board will depend on each side's next moves, the candidates they propose and shareholder attendance at the meeting in May, analysts said.
Shares in TIM closed down 1 percent at 0.77 euros against a 0.5 percent drop in Italy's blue-chip index.
Reporting by Agnieszka Flak, Valentina Za and Maria Pia Quaglia Editing by David Goodman and Keith Weir