Independents set to dominate after Telecom Italia board shake-up

ROZZANO, Italy (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. The reshuffle, which would ensure there are no executives from top shareholder Telefonica on the board, is aimed at placating minority investors concerned about a possible conflict of interest because the Spanish and Italian companies operate as competitors in Brazil. The move is also designed to help CEO Marco Patuano to 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, plus two candidates for chairman. Investors with a combined 51 percent shareholding 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 company. That lack of adequate representation for minority investors sparked a Fossati-led shareholder revolt last year with the aim of ousting the board. "Whoever the chairman and board members will be, they will have our support," Fossati told the shareholder meeting on Wednesday. "We have to start with a new era ... But if a conflict of interest becomes evident we will seek again to revoke the board." By midday the turnout at the meeting had risen to nearly 56 percent, a Telecom Italia source said. 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. TOUGH CHOICES Concerned that dissatisfaction could mount, Telco last month proposed 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 Patuano's stewardship, Telecom Italia will have to execute 2 billion euros (1.6 billion pounds) of planned disposals, including the sale of communications towers in Brazil and Italy, to cut debt and upgrade networks as it seeks to capture growing demand for broadband. He may also face hard choices when it comes to the group's future strategy in Brazil, where its TIM Brasil business competes directly with Telefonica's Vivo. Sources close to Telefonica have said that the Spanish group aims to break up TIM Brasil and share its assets among other telecoms 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 telecoms executive Vito Gamberale, who has been proposed by Fossati because of his extensive experience in the sector. (Reporting by Stefano Rebaudo and Danilo Masoni; Editing by John Stonestreet and David Goodman)