Pirelli Chairman Seeks To Replace Telecom Italia Chairman - Sources

MILAN (MF-Dow Jones)--Pirelli Chairman, Marco Tronchetti Provera is seeking to replace Telecom Italia Chairman Guido Rossi at the helm of Italy's largest telecoms operator, of which Pirelli is the controlling shareholder, people familiar with the situation said Wednesday.

As a result of a clash between Tronchetti Provera and Rossi over the future strategy of the Italian phone operator, Pirelli unit Olimpia will propose independent board member Pasquale Pistorio as the new chairman, the people said.

Later Wednesday Olimpia has to present its list of candidates for the new Telecom Italia board, which has to be elected by shareholders on April 16.

Pirelli owns 80% of Olimpia, which in turns controls 18% of Telecom Italia.

Though Tronchetti Provera appointed Rossi as his successor when he stepped down last September from his Telecom Italia post following an open clash with Italy's government, the two recently have squabbled over the company's strategy.

Pirelli surprised investors late Sunday announcing it is in exclusive talks to sell two-thirds of its controlling stake in Telecom Italia to U.S. company AT&T and Mexican phone operator America Movil.

If a deal is done, the two overseas companies would become the largest shareholders of Telecom Italia, defying the Italian government, which wants the former state monopoly and its strategic assets to stay in Italian hands.

Pirelli has been looking for new partners for the holding company for months, but previous talks, including with Italian banks, have broken down on price.

Investment bank Mediobanca and insurer Assicurazioni Generali, which have joined forces with Olimpia as key investors in Telecom Italia, have first refusal on the Olimpia stake.

Pirelli's stake in Olimpia has been a burden lately, causing it to post a loss last year after a EUR2.1 billion write-down related to the investment.

The market is betting on the possibility that political objections make it highly likely that local investors, including Mediobanca and Generali, are preparing a counter-offer to rival the joint bid by AT&T and America Movil.

At 1156 GMT, Telecom Italia shares were up EUR0.08, or 3.5% at EUR2.46, against a flat overall market.

-By Danilo Caselli, with MF-Dow Jones, and Giada Zampano, Dow Jones Newswires; +39 02 5821 9907; giada.zampano@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 4th April 2007