* Majority of 50.3 percent reject plan to oust board
* Rebel investor will continue fight, hints at legal action
* Italian government says it will not take sides in dispute
* Prosecutors investigate deal giving Telefonica more
By Danilo Masoni and Stefano Rebaudo
ROZZANO, Italy, Dec 20 Telecom Italia's
shareholders on Friday rejected by a slim majority an
attempt by dissident investors to oust its board, a decision
that allows CEO Marco Patuano to pursue his strategy to revive
the debt-laden phone company.
Rebel investor Marco Fossati, who holds a 5 percent stake
through his holding company Findim, vowed to continue his fight
aimed at weakening the increasingly powerful influence within
Telecom Italia of rival Spanish group Telefonica.
"It was a strong signal from the market and it must listened
to. We went very close (to winning) and we will go on," Fossati
told reporters after the vote, adding that he will submit a
proposal to give minority investors greater representation on
the company's board.
The tenure of the current board expires in April.
After meeting for more than seven hours, a majority of 50.3
percent rejected the proposal put forward by Fossati, who has
raised concerns the company will rush into selling its Brazilian
mobile unit TIM Participacoes, a rival to
Patuano, who last month unveiled a 4 billion euro ($5.47
billion) plan to fix Telecom Italia's balance sheet and fund
much-needed investments to reverse years of share
underperformance, denied allegations that the board was being
directed by Telefonica.
"In truth, Findim only stated, without giving proof, that
Telefonica was trying to direct Telecom Italia's board from the
outside, basing his argument on an unproven theory," Patuano, a
49-year-old executive who once ran Telecom Italia's Latin
American operations, told the meeting.
"No one can say they are satisfied with the current share
price of Telecom Italia. Not investors, nor shareholders, nor
its management. Debate is always worthwhile, but manipulation is
not," he said.
Meanwhile, Italian Prime Minister Enrico Letta pledged to
protect investment in Italy's telecoms network but said the
government took no side in a dispute over the role of Telefonica
in Telecom Italia.
The dissidents have also criticised Telecom Italia's recent
sale of its 22.7 percent key stake in Telecom Argentina
for $960 million, as well as a 1.3 billion euro
convertible bond issue - a dilutive deal from which they say
they were excluded.
Fossati had hinted earlier that, in the event of losing the
vote, he may consider pursuing a legal challenge, saying that it
would "be necessary to promote the company's interest in
different ways than via the shareholder vote".
Friday's vote pitted Fossati, Telecom Italia's third-biggest
shareholder, against Telco, the investment vehicle owned by
Telefonica, and a group of Italian financial institutions that
hold a 22.4 percent stake and managed to appoint the majority of
the current board.
Fossati initially appeared to have little chance of success
but backing from two groups who advise institutional investors
on which way to vote at such meetings, MSCI's ISS and
Glass Lewis, had made the outcome more uncertain.
Telefonica has 66 percent of Telco and recently secured an
option to gradually take over the stakes of its partners
Assicurazioni Generali, Intesa Sanpaolo and
Mediobanca from 2014.
Following that deal, Brazil's antitrust watchdog told
Telefonica to either sell its indirect interest in TIM
Participacoes, which has a market value of nearly $12 billion
and is 67 percent owned by Telecom Italia, or seek a new partner
for its own $20 billion local business, Vivo.
Telefonica's goal, according to sources familiar with its
plans, is to break up TIM Participacoes and divide its assets
and network among Vivo and the other two mobile operators in
Brazil, America Movil and Oi.
"Telecom Italia needs Brazil," one small retail investor
said at the meeting.
Several sources familiar with the matter said on Wednesday
that Telefonica would get 18 months to reach a solution.
Meanwhile Italian prosecutors said on Friday that they were
investigating the shareholding structure of Telco.
Telefonica declined to comment and other shareholders within
Telco could not immediately be reached.