UPDATE 1-Rebel investor seeks Telecom Italia board shake-up
* Move aimed at reducing Telefonica's influence on strategy
* Telecom Italia to discuss governance issues on Thursday
* Governance changes could affect strategy, Brazil moves (Adds details, sources on board meetings, context)
By Stefano Rebaudo
MILAN, Jan 15 (Reuters) - Rebel investor Marco Fossati asked Telecom Italia on Wednesday to give minority shareholders more board seats as he seek to reduce the influence of Spain's Telefonica over its rival.
Telefonica controls Telecom Italia together with three Italian financial institutions through the Telco investment vehicle, which has a stake of 22.4 percent in the company.
This has allowed Telco to appoint four-fifths of the board, leaving minority investors with little say over strategy.
In a letter to Telecom Italia's board, Fossati - whose 5 percent stake makes him the company's third-biggest investor - asked for a proportional voting system to be introduced.
Telecom Italia and Telefonica are direct competitors in Brazil and Fossati believes this conflict of interest could force Chief Executive Marco Patuano to take decisions favouring the Spanish telecoms giant.
A key point of debate is the future of Telecom Italia's Brazilian unit TIM Brasil, the main source of growth for the heavily-indebted Italian phone operator. Sources close to the matter say Telefonica is looking to break up and sell TIM Brazil to meet antitrust requirements.
"Fossati wants to make sure that a sale of Brazil is only carried out if the price is much higher than the current market value," a financial source familiar with his thinking said on Wednesday.
Discussions over governance will likely continue in the coming weeks amid speculation that an offer for TIM Brasil, whose market capitalisation exceeds $13 billion, may be around the corner.
Telecom Italia is expected to decide at a board meeting on Thursday that any offer for its prized Brazilian unit should be evaluated by independent directors, a move that could shield it from accusations of conflict of interest.
Another board meeting on Feb. 6 is expected to discuss Fossati's proposal for a proportional board representation of minority investors, a source close to the matter said.
According to rules currently in place, the list of board member candidates which gets most votes at a shareholder meeting gets four-fifths of the seats.
Fossati announced plans to seek greater board representation at a shareholder meeting Dec. 20, when his attempt to oust the board was rejected by only a slim majority.
Patuano, who is carrying out a 4-billion-euro ($5.5 billion) plan to fix Telecom Italia's balance sheet and fund much-needed investments, has denied allegations that Telefonica was governing the board.
But after December's vote, he said a more transparent company governance was needed and that support given to Fossati could not be ignored. ($1 = 0.7306 euros) (Writing by Danilo Masoni; Editing by Pravin Char)