Independents set to dominate at Telecom Italia after board reshuffle

MILAN, April 16 Wed Apr 16, 2014 6:21am EDT

MILAN, April 16 (Reuters) - Telecom Italia investors gathered on Wednesday to vote on a board restructuring that will for the first time put a majority of independent directors in charge of overseeing Italy's largest phone group.

In the reshuffle, executives from top shareholder Telefonica will no longer sit on the board.

That move is aimed at placating minority investors concerned about a possible conflict of interest, given that the Spanish and Italian firms operate as competitors in Brazil. It is also designed to help chief executive Marco Patuano focus on turning around the heavily indebted Italian group.

Shareholders will vote on three distinct lists of candidates, all of which would give independent directors a majority on the board.

Investors with a combined 51 percent were present as the meeting started, outgoing Chairman Aldo Minucci said, adding that Telco was present with its 22.4 percent stake, dissident investor Marco Fossati with 5 percent and U.S. fund Blackrock with 4.8 percent.

Telecom Italia's board has been dominated for years by holding company Telco, a Telefonica-led group that owns 22.4 percent of the Italian firm. The lack of adequate representation for minority investors sparked a shareholder revolt led by Fossati last year.

Telefonica's head Cesar Alierta and Julio Linares, a former chief operating officer at the Spanish company, resigned from the Telecom Italia board in December.

Concerned that dissatisfaction could mount, Telco proposed in March a new board of independent figures led by chairman candidate Giuseppe Recchi, a former General Electric executive and outgoing chairman of oil group Eni.

The new board will hope to tap into the recovering Italian economy, which is starting to pull clear of its worst recession in 70 years.

Under its stewardship, Patuano will have to execute planned disposals for 2 billion euros, including the sale of communications towers in Brazil and Italy, to cut debt and upgrade networks to capture growing demand for broadband.

He may also face hard choices when it comes to the Italian group's future strategy in Brazil, where Telecom Italia unit TIM Brasil competes directly against Telefonica's Vivo.

Sources close to Telefonica have said the Spanish group aims to break up TIM Brasil and share its assets among other telecom players. Fossati has spoken against such a prospect and proposed combining TIM Brasil with broadband operator GVT, a unit of France's Vivendi.

Recchi is likely to win the majority of votes he needs to become board chairman at Telecom Italia, but he is being challenged by veteran telecom executive Vito Gamberale, who has been proposed by Fossati for his extensive sector experience.

(Reporting by Danilo Masoni; additional reporting by Stefano Rebaudo; Editing by John Stonestreet)