* Stock has tumbled as questions posed over strategy
* Big shareholders stay quiet at annual meeting
* Minority of 31.9 percent vote against executive pay (Adds results of vote on pay package)
By Danilo Masoni and Stefano Rebaudo
ROZZANO, Italy, April 17 A succession of retail investors criticised Telecom Italia SpA at its annual shareholders' meeting on Wednesday, and some bigger shareholders unhappy with its performance also voted against an executive pay package.
Yet the seven-hour meeting approved the company's financial results with a 98.7 percent majority, and its pay proposal, albeit with a minority of almost a third voting against.
The debt-laden company's share price has tumbled to a near all-time low as Chairman Franco Bernabe tries to resolve a deadlock over its future plans and tension caused by an ownership structure that gives core investors, holding less than a quarter of the stock, effective control.
Management is casting round for ways to cut debt of more than 28 billion euros ($37 billion) and hang on to Telecom Italia's credit rating as recession bites into profits at home in Italy and growth slows in its key market of Brazil.
Several retail investors at the meeting questioned the board's performance and strategy and a proposed tie-up with Hutchison Whampoa, but bigger shareholders were mute.
Foreign and Italian institutional investors hold more than half of Telecom Italia's share capital and the meeting had been widely expected to back the board on the day's main resolutions.
In the run-up to the meeting, several proxy advisory firms had recommended voting against an executive pay package, which included remuneration for Bernabe of 3 million euros, a 20 percent cut from last year.
Shareholders representing 44.4 percent of the company's capital were registered to vote in person or by proxy, leaving the core investors - Spain's Telefonica, a competitor of Telecom Italia in its second-biggest market Brazil, and a trio of Italian financial institutions - in the driving seat.
That group of companies, known as Telco, has a stake of about 22.4 percent. Telco's Italian investors are top investment bank Mediobanca, insurer Generali and Intesa Sanpaolo, the country's largest retail bank.
"The only thing that has grown during Bernabe's management is bonuses and stock options," said a small shareholder named Rencurosi.
UNCERTAINTY AND ANGER
The speeches underscored worries over prospects for the former monopoly, which inherited its debts from a highly leveraged takeover in 1999.
"There is a lot of uncertainty, anger and lack of confidence," said one small investor who was identified only by his surname, Savina.
After posting a 2012 net loss of 1.6 billion euros due to goodwill writedowns, Telecom Italia was forced to cut its dividend and turn to costly hybrid securities to fund upgrades of its network and cut its lumbering debts.
Franco Lombardi, head of retail investors association ASATI, with about 0.5 percent of Telecom Italia shares, renewed a request to change the group's bylaws in order to give larger board representation to minority investors and called on foreign shareholders to back him.
The current board of Telecom Italia is due to be renewed in April 2014.
Last month, 5 percent investor Marco Fossati also called for governance changes and said the company needed new strategy and possibly new management to avert risks of a takeover or a capital hike at a deep discount.
He said the stock could benefit from opening up the capital to investors outside Europe, provided they did not take a controlling stake.
Chairman Bernabe told the shareholders he would look into the possible changes to the bylaws, indicating a possible rupture with Telco, but did not give any time frame.
"It is something the shareholders are asking for and, on my part, is considered worthy of attention," Bernabe said at the start of the meeting, referring to Fossati's requests.
Last week, Bernabe and four directors were tasked with looking into a tie-up with Hutchison Whampoa that would make the Hong Kong-based group Telecom Italia's biggest shareholder.
The deal envisages a merger with Hutchison's Italian mobile phone unit 3 Italia but faces various hurdles, principally political opposition to Telecom Italia's fixed-line network, an asset seen as of strategic national importance, falling into foreign hands.
Telecom Italia shares closed 2.6 percent lower at 0.59 euros. ($1 = 0.7616 euros) (Additional reporting by Stephen Jewkes; Editing by Tom Pfeiffer and David Holmes)