Telecom Italia loses CEO in boardroom clash after KKR offer



* TIM Brazil head Labriola named director general

* KKR has tabled $12 billion proposal to take TIM private

* Under fire from top investor, CEO offers to give up powers

* Auditors raise fresh concerns over costly soccer deal (Recasts with sources on outcome of board meeting)

By Elvira Pollina

MILAN, Nov 26 (Reuters) - Telecom Italia (TIM) TLIT.MI lost its fourth chief executive in six years on Friday after Luigi Gubitosi handed over his powers following a clash with top investor Vivendi VIV.PA , two sources close to the matter said.

Gubitosi relinquished his responsibilities on Thursday, saying in a letter seen by Reuters he did not want to stand in the way of the board giving prompt consideration to a $12 billion takeover proposal by U.S. fund KKR.

TIM's board handed Gubitosi's powers over to Chairman Salvatore Rossi at a meeting on Friday while TIM Brazil head Pietro Labriola was named director general, the two sources said.

The board of Italy's biggest telecoms company also discussed the threat to earnings from a soccer rights deal that has failed to help revenue and has contributed to two profit warnings.

TIM's disappointing results have strengthened Vivendi's hand in pushing out Gubitosi who had been brought in by rival TIM investor Elliott in 2018.

Gubitosi has not stepped down as a director, the sources said, preventing Labriola from joining the board and being named as CEO, adding the meeting was still ongoing.

STALLING

Gubitosi, in his letter to the board, criticised directors for stalling on KKR's offer to please some shareholders.

He rejected speculation that he was close to KKR, and urged the board to grant the New York-based fund access to company data and appoint advisers.

TIM's board first examined on Sunday KKR's non-binding proposal to take it private in a 33 billion euro deal including debt.

The offer followed a downgrade of TIM's debt that pushed it further into junk territory a week ago, which two sources said had hastened KKR's decision because TIM was at risk of breaching bank covenants.

Auditors have raised fresh concerns over the 1 billion euro deal Gubitosi struck with DAZN to stream Italy's top-flight soccer matches, another two sources close to the matter told Reuters.

One of the sources said a further downgrade to TIM's financial outlook cannot be ruled out, in what would be a fresh blow to holders of its debt, already equal to around four times TIM's core profit.

STRATEGIC ASSET

The face-off between Gubitosi and Vivendi is the latest boardroom crisis at TIM, which has had three CEOs since 2015, when the French media group began building its 24% stake.

Gubitosi first brought KKR on board last year, striking a 1.8 billion euro deal that handed the fund a 37.5% stake in TIM's so-called last-mile network reaching into people's homes.

The takeover offer for the whole of TIM comes as Italy prepares to spend 6.7 billion euros of European Union recovery fund to speed up ultra-fast broadband rollout across the nation.

TIM's fixed network, which the government is keen to see upgraded to fibre, is Italy's main telecoms infrastructure and Rome has said its response to KKR will hinge on plans for the network.

Rome has special powers to block moves on strategic companies such as TIM but the executive of Prime Minister Mario Draghi has hailed KKR's interest as good news for Italy.

Sources have said KKR, which consulted the government before tabling its offer, plans to carve out the network and give state investor CDP - currently TIM's second-biggest shareholder - a leading role in overseeing it. ($1 = 0.8874 euros)
Additional reporting and writing by Valentina Za; Editing by Alexander Smith, Susan Fenton, Elaine Hardcastle

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