Telecom Italia picks Patuano as CEO after strategy clash


* Insider Marco Patuano becomes chief executive

* Franco Bernabe quits as chairman after clash withshareholders

* New management could sell Brazilian unit

* Shares rise 1.7 percent

By Danilo Masoni and Stefano Rebaudo

MILAN, Oct 3 (Reuters) - Telecom Italia said onThursday it had picked insider Marco Patuano as chief executiveafter long-standing executive chairman Franco Bernabe resignedin a strategy clash with core shareholders, paving the way forpossible asset sales.

Patuano, who started his career in Telecom Italia aftergraduating at Milan's elite Bocconi university in 1990, isexpected to draw up a new business plan that could includedivestments at the debt-laden former monopoly phone company.

Telecom Italia thanked Bernabe for his contribution andagreed an exit package of 6.6 million euros ($9 million). Itgave no reasons for his departure after six years at the helm.

The resignation of the urbane 65-year-old businessmanfollows what industry and market sources have said was a clashover strategy with the core shareholders Telefonica,Intesa, Generali and Mediobanca.

These shareholders agreed two weeks ago to gradually giveSpain's Telefonica full ownership of Telco, their investmentvehicle which controls Telecom Italia via a 22.4 percent stake.Bernabe had opposed the deal, a number of the sources have said.

Telecom Italia also said on Thursday it had started to lookfor a permanent chairman.

Patuano will face the task of cutting nearly 29 billioneuros of debt at Telecom Italia, one of Italy's largestprivate-sector employers, as well as reversing years of sluggishgrowth and boosting its share price.

"The group has strong potential. I believe its currentmanagement is able to develop it," said board member GaetanoMicciche as he left the board meeting.

Analysts say a new leader increases the likelihood thatTelecom Italia will put its Brazilian unit TIM Participacoes up for sale to help cut debt and fund badly-neededdomestic investments.

Bernabe had opposed asset sales and had been seeking supportfor a share issue to raise as much as 5 billion euros to avoid acredit rating downgrade to "junk" status.

During his tenure Telecom Italia's debt was cut by 8 billioneuros but almost 30 billion euros was wiped off its share marketvalue, a 75 percent drop in the price.

Telecom Italia shares ended up 1.7 percent at 0.64 euros bythe market close on Thursday, down by 7 percent so far this yearand over 17 percent on a year ago.

"We are optimistic that Telecom Italia can be worthsignificantly more and be a better part of the Italian economyin its next phase of life," Bernstein analyst Robin Bienenstock,who rates the stock "Outperform" and has a 1 euro price target,said in a note.

The company in August warned its profit would fall fasterthis year than it had previously thought, as a price war formobile phone services and the deep economic recession in Italybite.

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