* Share sale or disposal of Brazil unit seen as main options
* Bernabe wants to pursue investment plan
* Some core investors looking to sell to Telefonica
* Decision expected by Oct. 3 board meeting
By Danilo Masoni and Stefano Rebaudo
MILAN, Sept 19 Telecom Italia Chairman
Franco Bernabe and core shareholders failed in hastily-convened
talks on Thursday to bridge differences on how to relaunch the
debt-laden group ahead of a board meeting early next month.
Bernabe wants investors to commit to an investment plan that
could be worth around 3 billion euros ($4 billion), designed to
reverse years of lacklustre growth and fend off a credit rating
downgrade, sources with knowledge of the situation said.
But influential shareholders do not want to pour more money
into the loss-making investment, with some exploring the option
of selling their shares to fellow investor Telefonica
ahead of the Oct. 3 board meeting, the sources said.
"The situation is still in flux and no decision has yet been
taken on the shareholder structure," one of the sources said.
"The meeting on Oct. 3 will be decisive."
Telecom Italia has made no comment on the talks, which were
called unexpectedly at the company's offices in Milan after a
planned board meeting had earlier been cancelled.
Directors were also tight-lipped on the meeting, which was
attended among others by board member and Telefonica CEO Cesar
Tarak Ben Ammar, another director, tried to defuse tension
by saying the crisis meeting had been "a lunch among friends."
While Bernabe, who has been at the helm of Telecom Italia
since 2008, backs a capital increase to fund investment, core
investors appear to prefer disposals, the sources told Reuters.
Some shareholders have privately expressed disappointment
over Telecom Italia's strategic plans as it grapples with
recession at home and slowing growth in Brazil.
"The shareholders are against a new capital hike, they want
Bernabe to present a new business plan which guarantees the
viability of the company. If Bernabe needs money, he has to
divest," the source familiar with the situation said.
Telecom Italia's main source of growth is its Brazilian
mobile arm Tim Participacoes, which has a stock
market value of some $11 billion.
SOURCES OF FINANCE
Telecom Italia has struggled to grow because of its 29
billion euro debts and falling margins. It needs to find other
sources of financing after directors rejected two attempts by
Bernabe to bring in new investors.
Any decision on strategy is complicated because core
shareholders, bound together in a holding company called Telco
that owns 22.4 percent, have to say by Sept. 28 if they want to
exit their pact early and ditch their stakes.
Otherwise the pact runs to 2015.
Telco's largest investor Telefonica has offered 800 million
euros to buy some shares from Italian partners Generali
, Mediobanca and Intesa Sanpaolo.
But the offer was rejected, according to daily Il Sole 24 Ore.
A cash call could open the door to a new investor.
Telecom Italia and Telefonica declined to comment. Generali
and Mediobanca had no immediate comment.
Analysts see AT&T, Egyptian tycoon Naguib Sawiris and
cash-rich Vodafone as possible predators in a shake up
of the sector expected to be triggered by Vodafone's $130
billion exit from its U.S. wireless investment.
But the board of Telecom Italia has already rejected a 3
billion euro cash injection offer from Sawiris and a merger
proposal from Hong-Kong-based Hutchison Whampoa.
Intesa Chairman Gian Maria Gros-Pietro said on Thursday only
that the bank was open to any solution that would benefit
Telecom Italia, its investors and creditors.
In August Telecom Italia warned its 2013 profit would fall
faster than expected, prompting rating agencies to threaten a
downgrade to "junk" status.
Telco investors took control of Telecom Italia in 2007,
before the global financial crisis, paying shares 2.8 euros
each. The stock is now worth 0.59 euros.