Sunday, February 26, 2006

The perks of ownership, Italian style

Mistrust and loathing for your local phone company is a universal human condition. They are inefficient, uncaring and unhelpful institutions. They *make hoards of cash and seem to employ only small-minded people who tell you they can be at your house next Monday between 9 and 1 pm, or 2 to 6 pm. We'll call you on the day to tell you which. Except they never arrive, never call. Sound familiar?

In Italy, it's not quite that simple. All the above are true of Telecom Italia, the former state monopoly, except that it is massively in debt (Its net debt of 42 billion euros as of September, '05 is high even by European telco standards). However, its CEO, Marco Tronchetti Provera, has marvelous hair and is permanently tanned and frankly looks damn good in the society pages and gossip mags, and so there's really nothing to complain about, is there? And now there's a new book out called L'Industriale describing him as a revolutionary thinker, a 21st Century CEO. I saw him a few weeks back addressing fellow captains of industry at an OECD event. He used his 15 minutes to slam the evils of cheap (or even free) Internet telephone service. (The crowd of geeks would have booed him had it not been for this man's hypnotising tan that cold, grey January morning). Innovation, in this man's book, no doubt is not to be trusted.

Beppe Grillo, the genius satirist/muckraker, has a bigger bone to pick. He rightly questions how this man could even be called an industrialist when he doesn't really own much of anything.

From Grillo's blog:

But the president of Telecom Italia, “the Industrialist”, how much of this company in constant decline does he own? It has a debt equal to the GDP of many countries and its share value has lost almost half its value since 2001. Have a little think before reading the answer: how much of Telecom is owned by this unhappy Tronchetti ...
Have you had a think? Well, it’s less than that!

It’s slightly more than 0.8%.

In fact, keep following my argument, and I know it’s difficult for those who are still sane:
- Marco Tronchetti Provera & C a.p.a owns 61.48% of Gruppo Partecipazioni Industriali (GPI)
- GPI owns 50.18% of Camfin
- Camfin owns 25.36% of Pirelli
- Pirelli owns 57.7% of Olimpia
- Olimpia owns 18% of Telecom Italia

less than one per cent, “the industrialist” governs one of the biggest Italian Groups.
The same Group that has been fined 115 Million Euro for the abuse of its dominant position in the telephony sector.
An industrialist without money, without results.

Dear shareholders, substitute him!

The old box-within-a-box-within-a-box ownership scheme is famous in Italy. It concentrates ownership into the fewest possible hands while spreading the liabilities out to a complex network of companies and holding companies. I haven't read L'Industriale, but I am sure this is explained fully in chapter one.

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