* Rebel investor wants minorities to have more board seats
* CEO says company needs "more transparent" governance
* Key strategy issue is future of Telecom's unit in Brazil
* Tenure of current board expires in April
By Danilo Masoni
MILAN, Dec 23 Telecom Italia is likely
to have to give minority investors more say after narrowly
surviving an attempt by rebel shareholders to throw out the
board, potentially complicating decisions over its prized
Investor Marco Fossati, who owns a 5 percent stake, has led
a campaign against the growing influence of top shareholder and
rival Telefonica, fearing the Spanish group might force
a rushed sale of Telecom Italia's TIM Brasil unit to
further its own ends in the fast-growing Latin American market.
Telecom Italia is controlled by Telco, an investment vehicle
owned by Telefonica and three Italian investors - Generali
, Mediobanca and Intesa Sanpaolo.
While it owns just 22.4 percent of the phone group, it has
managed to appoint nearly all directors in the current board.
Telecom Italia investors on Friday rejected by a thin
majority of 50.3 percent Fossati's proposal to oust the board.
Though the proposal failed, it represented the first serious
threat to Telco's leadership in the Italian group since it took
control six years ago.
Shareholders also rejected a plan to replace two board
members with candidates put forward by Telco, dealing a blow to
the top shareholder and to new CEO Marco Patuano, who was picked
to lead Telecom Italia's turnaround drive in October.
"The result is putting fresh pressure on the board and the
management of Telecom Italia to take into greater consideration
minorities," Banca Akros analyst Andrea de Vita said on Monday.
"Longer term we see governance improving and greater impact
of independent directors. Unfortunately, this comes a bit late."
Since Telco took control in 2007, Telecom Italia shares have
lost 70 percent, debt has remained high and its domestic
business has been hit by a recession and fierce competition.
Telefonica's goal, according to sources familiar with its
plans, is to break up TIM Brasil and divide its assets and
network among its local business Vivo and the other two mobile
operators in Brazil, America Movil and Oi.
The next governance challenge for Telecom Italia is expected
to emerge by April, when its board's three-year mandate ends.
Fossati, who is not represented on the current Telecom
Italia board, vowed on Friday to continue his fight and
announced plans to submit a proposal to change the company's
by-laws and give minority investors greater board
U.S money-manager Blackrock could have a pivotal
role going forward after emerging this month as Telecom Italia's
second-biggest shareholder with a near 10 percent stake.
Telefonica's two representatives on Telecom Italia's board
quit on Dec. 13 in a bid to blunt criticism that it had too much
influence over Telecom Italia.
In September Telefonica, which owns 66 percent of Telco,
agreed to gradually buy out its Italian partners in Telco from
2014, a deal that was followed by the appointment of Patuano.
Patuano, who last month unveiled a 4 billion plan to fix
Telecom Italia's balance sheet and fund much-needed investments
to reverse years of share underperformance, denied on Friday
allegations that Telefonica was governing the board.
After the vote, he said a more transparent company
governance was needed and that support given to Fossati could
not be ignored.
"Telco will have to present a list of candidates with a
marked independent profile to win the approval of third party
investors," an analyst at a leading brokerage firm said.
Patuano also ruled out on Friday the possibility of an offer
for TIM Brasil before April, calling the unit strategic.
Following the Telco deal in September, Brazilian regulators
told Telefonica to either sell its indirect interest in TIM
Brasil or seek a new partner for its own local business Vivo.