Eight members of Telecom Italia's board of directors resigned on Thursday, triggering a re-election of the entire board as an activist investor fund has challenged the control over the company by France's Vivendi.
Activist fund Elliott had called for the removal of six board members at a shareholders meeting next month, complaining about Vivendi's management of Telecom Italia (TIM), which like many other former state monopoly operators has had trouble in the face of heightened competition and rapid technological change.
But in a statement released on Thursday, Telecom Italia said that eight directors had announced their resignation, which it says under the company's bylaws means that the entire board must be re-elected.
"In resigning, the aforementioned directors have expressed their hope that this move would help to clarify and provide certainty to the governance of the company," said a company statement.
A shareholders meeting was called for May 4 to elect the new board.
Among those who quit was executive chairman Arnaud de Puyfontaine, who is also Vivendi's CEO, and whom Elliot sought to remove.
"As chairman of TIM, and in the interest of all the shareholders, I want to free the board from the climate of uncertainty that was created," de Puyfontaine told journalists.
He said at the May 4 meeting "shareholders can rapidly elect a new board instead of voting for partial changes as requested by Elliot."
Sometimes called a "vulture" fund, Elliott has regularly invested in companies in difficulty or whose shares it considers undervalued, and often engages in showdowns with those companies' management.
Last week it called for a shake-up at the top "to improve both governance and performance at TIM".
Despite controlling only 24 percent of ordinary shares, Vivendi has managed to gain de facto control over the company through getting its people on TIM's board and senior management.
"Elliott believes that the company is managed in the interest of Vivendi and to the detriment of all other TIM shareholders," it wrote.
It also highlighted the 35 percent drop in the value of the company's share price from when who it calls "Vivendi nominees" joined the board in December 2015 to "the day before our interest in the company was made public".
De Puyfontaine said Thursday the election "gives each shareholder an opportunity to choose between a business strategy capable of creating long-term value and a programme of short-term financial engineering."
Elliott will need to find allies to carry the day at the shareholding meeting as it holds a stake of around 5 percent in TIM.
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