By Gwénaëlle Barzic, Agnieszka Flak and Tatiana Bautzer


PARIS/MILAN/SAO PAULO (Reuters) - Telecom Italia's fund investors are counting on a former Israeli army captain and telecoms dealmaker to complete the company's overhaul -- with a burst of deals.


The company this week let go chief executive Flavio Cattaneo after just 16 months of a four-year contract, even though many regard him as the author of a remarkable turnaround at Telecom Italia.


The European telecom has nevertheless managed to keep the faith of investors thanks to the expected arrival of Amos Genish. Three sources close to the matter say he will become the new boss to finish the work begun by Cattaneo.


Reuters could not reach Cattaneo for comment. An email query to Genish was referred to his employer and main Telecom shareholder, French media group Vivendi, whose spokesman said he did not want to comment for the story.


For graphic on Telecom Italia shares in the last two years click:

A spokesman for Telecom Italia, which has yet to announce a successor to Cattaneo, declined to comment.

"Genish will get to work right away," said Tommaso Iaquinta, head of New York-based hedge fund ONCE Capital Management, among Telecom Italia's top 100 investors.

He and some other fund investors say they are counting on Genish to spin off its Italian fixed-line network and perhaps sell Telecom Italia's Brazilian business before, ultimately, merging the remaining business with a bigger European rival.

The listed Brazilian unit, Telecom Italia's only international operation, has a market value of about $8 billion.

"The game is only starting now," Iaquinta said, adding that the changing of the guard should accelerate the deal-making required to realize the hidden value of Telecom Italia's assets.

Sources say Genish, 57, has been chosen to take the reins of Telecom Italia by its controlling shareholder, Vivendi, where the Israeli-born executive works as chief convergence officer.

They say he is a favorite of Vivendi chairman Vincent Bolloré who hired him in January after Genish left Spain's Telefonica.

Bolloré had wanted Cattaneo to hand some key responsibilities to Genish, an idea that rankled the Italian and led to his exit, said a source close to the matter, adding that Vivendi viewed him as "too independent".

When Genish starts calling the shots, it may be as general manager or managing director rather than chief executive, said the source familiar with the matter. Given Telecom Italia's chairman, Vivendi CEO Arnaud de Puyfontaine, already has executive powers, there would be no need for a chief executive.

In that scenario, De Puyfontaine could trump Genish but would leave key decisions to him, the source said. For political reasons, it would keep an Italian as deputy chairman, the source added. Rome, which has no stake in the company, would prefer an Italian to play a senior role in overseeing a business that holds strategic communication assets.


Genish and Vivendi go back years: Genish sold Brazilian telecoms start-up GVT to Vivendi in 2009 and five years later convinced Bolloré to sell it on to Telefonica, making a capital gain of $4 billion for the French media group.

"Genish is part of the (Vivendi) family," another source close to the matter said. "He is a tough guy, but he knows how to gather teams around him. He can create a lot of value."

As boss at Telefónica Brasil, Genish grabbed market share from rivals and turned it into Brazil's most profitable carrier in spite of the worst recession in more than eight decades.

"He has a strong leadership style and little regard for corporate politics," one former Telefonica Brasil executive said, recalling how Genish's brash manner sometimes ruffled feathers and "created a stressful environment".

Genish co-founded GVT with the idea of connecting people in remote areas of South America with a satellite-based phone network which would later stretch from the jungles of Peru and Chile to guerrilla-controlled regions of Colombia.

Investors hope Genish, who has described running GVT like "a military operation", will set in motion a similar overhaul at Telecom Italia, a former state monopoly saddled with 25 billion euros ($29 billion) of debt.

That is why Telecom Italia's stock rose this week after Cattaneo's exit, albeit modestly.

Cattaneo, who leaves the company on Monday, launched a drive to cut costs, boost profitability and make Telecom Italia a more nimble competitor. He returned the domestic business to growth and raised investment in broadband and mobile infrastructure.

His achievements left Telecom Italia the awkward task of announcing it was ending the employment of its much-lauded CEO by mutual consent and was paying him 25 million euros to go.

The announcement gave no reason and was issued days before the firm is expected to unveil its strongest half-year results in many years.


Cattaneo left unfinished business.

Telecom Italia's fixed-line business is losing value, new competitors are appearing in both broadband and mobile and in Brazil it is grappling with economic malaise.

Investors expect Genish to tackle the future of Telecom Italia's fixed-line network, estimated by analysts to be worth up to 15 billion euros. The Italian government considers the network as strategic and some ruling-party lawmakers say it should be state-controlled, a neutral platform open to all.

In any deal, Genish is expected to defend the interests of Vivendi whose growing influence in Italy is under scrutiny in Rome. The French firm has also recently built a heavy stake in the country's biggest private broadcaster, Mediaset.

"Vivendi will expect Genish to be on their side," said Xavier Laurent, European Equities Fund Manager at Aviva Investors, which has shares in both Telecom Italia and Vivendi.

Cattaneo is the second CEO to leave Telecom Italia in less than two years over what sources have said were clashes with Vivendi.

That leaves some investors wondering about Vivendi's ultimate aim for Telecom Italia: whether to use it as a pillar of its plan to create a southern European media empire, or as an asset to trade in the next wave of mergers in European telecoms.

Telecom Italia has long been seen as a takeover target because it is smaller than many of its European rivals and it has first-mover advantage in Italy's ultrafast broadband market.

"Telecom Italia has always been, in many ways, a pawn in other people's games," said a top-20 Telecom Italia shareholder.

(Additional reporting by Simon Jessop in LONDON; Editing by Mark Bendeich and Anna Willard)