French media giant Vivendi (>> Vivendi) said on Monday it has no "de facto control" over Telecom Italia (>> Telecom Italia) under Italian law.
Acknowledging "de facto control" over Telecom Italia would compel Vivendi to consolidate its accounts, including an adjusted net financial debt of 25 billion euros (22.7 billion pounds).
Vivendi's statement, albeit technical in its wording, underscores the growing pressure it faces in Italy, where local authorities are increasingly questioning the way it has erupted in the telecommunications and broadcasting businesses.
The group, led by French billionaire Vincent Bollore, has shaken up Telecom Italia's governance since becoming its biggest shareholder, with a 24 percent stake, and has lately placed two of its top executives at the helm.
It has also built up a 29 percent stake in the country's biggest commercial broadcaster, Mediaset (>> Mediaset), becoming its second-biggest shareholder after former Italian prime minister Silvio Berlusconi.
Italy's government is looking into whether Vivendi breached an obligation to notify Rome of its "direction" role at Telecom Italia, a company considered a strategic national asset.
In an interview with newspaper La Stampa last month, the chairman of Italy's markets authority Consob said there could be a transparency issue around top Vivendi's management of Telecom Italia.
"(Vivendi's) participation in Telecom Italia is not sufficient enough to allow it to exercise, on a stable basis, a dominant influence at Telecom Italia shareholders’ meetings," Vivendi said in its statement on Monday, to explain why it did not consider fully controlling the operator.
The statement came two months after Vivendi got the conditional approval from European Union antitrust authorities for its plan to gain control of Telecom Italia.
The notion of control is shared by antitrust, commercial and accounting authorities, but does not necessarily entail the same implications.
“There’s a single concept of sole control, but three different fields in which this concept is applied (corporate law, antitrust law and accounting law)," said Christophe Clerc, a Paris-based lawyer at Descartes Legal and financial law expert.
"To add to the confusion, the existence of such a control is not necessarily assessed by the same bodies.”
Under accounting law, the notion of control is key to determine whether a company exerting a significant influence over another company must consolidate the financial accounts.
(Reporting by Mathieu Rosemain; editing by Alexander Smith)
By Mathieu Rosemain