A succession of retail investors criticized Telecom Italia at a meeting on Wednesday, but any bigger shareholders unhappy at its performance avoided the kind of open challenge that could rattle management.
The debt-laden company's share price has tumbled close to an 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 with tiny stakes questioned the board's performance and strategy and a proposed tie-up with Hutchison Whampoa (Hong Kong) at the annual shareholder meeting. No large investors had stood to speak by early afternoon.
Foreign and Italian institutional investors hold more than half of Telecom Italia's share capital and the meeting was widely expected to back the board in the day's main resolutions.
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 (Madrid, Spain), a competitor of Telecom Italia (Rome, Italy) 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 (Milan, Italy), insurer Generali (Trieste, Italy) and Intesa Sanpaolo (Turin, Italy), the country's largest retail bank.
"A lot of people are missing" from the meeting, said Franco Lombardi, head of retail investors association ASATI, which represents about 0.5 percent of Telecom Italia's share capital.
The turnout at last year's meeting was 52.9 percent.
The speeches underscored worries over prospects for the former monopoly, which inherited its debt mountain from a highly leveraged takeover in 1999.
"There is a lot of uncertainty, anger and lack of confidence," said a 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.
RUPTURE WITH TELCO?
In the run-up to the shareholder meeting, some market players warned that Telecom Italia's executive pay package may be rejected.
Several proxy advisory firms, including the influential ISS, have recommended a vote against the remuneration plan.
Lombardi 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.
Shares in Telecom Italia rose on Wednesday after a report that 3 Italia was less profitable than previously thought.
At 1059 EDT (1459 GMT), Telecom Italia shares were down 3.4 percent at 0.59 euro while a European telecoms sector index was down 1 percent.
(Additional reporting by Stephen Jewkes; Editing by Tom Pfeiffer)