by Eric J. Lyman
ROME, Sept. 19 (Xinhua) -- The Italian government is gearing up to use its rare veto power it has over strategic private companies amid worries that a foreign entity -- French media giant Vivendi -- may have quietly amassed a controlling stake in Telecom Italia, the former Italian state telephone monopoly.
Italian law gives the government what is called a "golden share" or "golden power" to block certain developments for domestic companies considered strategic, such as major utilities, transport companies, or telecommunications. Use of the power has been threatened a handful of times in the past but never actually used.
At the center of this case is the concern that Vivendi's influence with Telecom Italia has become too powerful. Vivendi's 24 percent stake in the Italian company doesn't surpass any formal limits: a shareholder is only required to notify CONSOB, Italy's security regulator, once its stake in a strategic company surpasses 25 percent.
But CONSOB says Vivendi has de facto control over Telecom Italia, exercising influence over the company's operations and decision making and appointing two-thirds of the Telecom Italia board of directors.
"This situation is far more complex than simply determining whether Vivendi's stake is above or below 25 percent," Rocco Panetta, an attorney specializing in antitrust issues for Rome's Panetta & Associati law firm, told Xinhua. "The challenge is to understand how Vivendi is using its influence at Telecom Italia, and that is not an easy task."
For its part, Vivendi denies wielding undue influence in Telecom Italia. The company formally notified the government of its position in Telecom Italia Sept. 15, but it stressed that it participates in only "management and coordination" at the Italian company.
"This notification as made voluntarily, and is something no other investor has been compelled to do before this," Vivendi said in a statement published in the Italian media.
The stakes of the process are very high. If found guilty of failing to notify the government of having acquired a controlling stake in Telecom Italia Vivendi could face a fine of up to 300 million euros (360 million U.S. dollars). It could also be forced to take on some of Telecom Italia's 25 billion euros (30 billion U.S. dollars) in debt, or to sell some of its shares in the company.
Vivendi has already been under scrutiny in Italy for taking a 29-percent stake in Mediaset, Italy's largest broadcaster. Unlike Telecom Italia, Mediaset is not considered a strategic business.
Still, AGCOM, the main Italian communications sector regulator, has called on Vivendi to reduce its stake in either Mediaset or Telecom Italia to below 10 percent to avoid holding too much influence in the communications sector.
Vivendi says it is working on a plan to transfer most of its Mediaset shares to a special trust. But that may not be enough.
Meanwhile, tensions between Italy and France are already high after France took steps to block an Italian company from taking over France's STX Shipyards, something the French government considers a strategic holding.
"We probably wouldn't be having these problems if it was not a French company involved," Raffaele Barberio, director of the Key4biz news site, said in an interview.
It is in that context that Carlo Calenda, Italy's minister for industry, threatened use of the government's veto power to sanction Vivendi and perhaps force it to reduce its stake in the telecoms giant.
Italian government officials are expected to meet Sept. 25 to debate the situation. Calenda said standing up to Vivendi was a matter of national sovereignty, though he did so without mentioning the French company by name.
"We are heading toward a period when international economic relations will become more difficult," Calenda said in a Sept. 16 media briefing. "Italy must maintain the ability to be assertive in order to defend its own assets."