By Giuseppe Fonte and Agnieszka Flak
ROME/MILAN (Reuters) - Italy told Telecom Italia (MI:TLIT) on Monday that it wants to have a say in all its strategic decisions, in the strongest sign so far that Rome intends to rein in the growing influence of French group Vivendi over the former state monopoly.
Prime Minister Paolo Gentiloni signed a decree activating the so-called "golden power" on Telecom Italia (TIM) after Vivendi (PA:VIV), now TIM's biggest investor with a 24 percent stake, tightened its grip on the company.
The golden power - which had never been used by Rome before - enables the government to veto certain actions, including asset sales, mergers and any change of control of companies which are regarded as being of strategic national importance.
Signalling it will not let Vivendi run TIM - now a listed group with no state holding - at its own pleasure, Rome demanded that all matters pertaining to national security at the company, including submarine network unit Sparkle and software division Telsy, be handled by an Italian citizen approved by the state.
The government also told TIM that it would appoint the boss of a special security unit which will be involved in all decision-making related to strategic activities at the company and its fixed-line network, TIM said in a statement.
Sparkle is seen as politically sensitive because its submarine network connects countries in Europe, the Mediterranean and the Americas, while Telsy provides encrypted communications technology to customers such as the Italian army and the government.
In a statement after a cabinet meeting, Rome said TIM needed to ensure that assets relevant to national security operate as autonomous entities in terms of finances, personnel and strategy, but it stopped short of explicitly asking for placing those assets into separate entities.
Italian politicians have been calling since 2006 for TIM's fixed-line network, the company's most-prized asset, to be transferred to a state-controlled entity as Rome considers it a strategic asset that should be a neutral platform open to all phone companies.
TIM, which has 90 days to comply with the requirements, said it already has a governance and organisational set-up that partially meets Rome's demands.
But the government's requests are bound to escalate a row with Vivendi, whose growing influence in Italy has been under intense scrutiny this year.
Rome's decision is also likely to add further strain to Italy's relationship with France, after the countries squabbled for months over shipbuilder Fincantieri's purchase of a controlling stake in French shipyard STX France before reaching a complex deal last month.
Rome took notice of Vivendi's growing assertiveness at TIM after the French group, led by acquisitive billionaire Vincent Bollore, appointed a majority of board members at the Italian company and installed two of its own executives as chairman and chief executive earlier this year.
Last month Italy's market watchdog Consob said Vivendi was effectively controlling TIM, something the French company denied but which helped the government argue it had grounds to use its special powers.
Vivendi is also under regulatory scrutiny for its accumulation of a near 30 percent stake in private broadcaster Mediaset (MI:MS), owned by former prime minister Silvio Berlusconi, because of concerns that Bollore will come to dominate the media and telecoms industries.
TIM's shares closed down 1.1 percent at 0.76 euros (0.6765 pounds), while shares in Vivendi ended down 0.3 percent. Vivendi declined to comment.