By Danilo Masoni
MILAN, Nov 7 (Reuters) - Telecom Italia's board members were meeting on Thursday to approve a new plan to help revive its business in their first gathering since Spain's Telefonica struck a deal to tighten its grip on the Italian group.
Telecom Italia's board, controlled by Telco - an investment vehicle that Telefonica agreed in September to progressively take over - is expected to look at ways to cut costs, slash its nearly 29 billion-euro ($39 billion) debt and return to growth.
New CEO Marco Patuano is expected to propose to the board a cash injection of up to 2 billion euros, the sale of assets such as the group's mobile towers in Italy or its Argentinian unit, and a dividend cut, sources familiar with the strategy said.
The sources said Telefonica was also considering the sale of Telecom Italia's growing Brazilian unit, TIM, in 2014, a plan opposed by Telecom Italia's second-largest investor, Marco Fossati, who has a stake of 5 percent.
The Italian businessman, who has been left out of the Telco deal, flew to London on Wednesday to meet analysts and outline his plans for Telecom Italia. He called last month for a shareholder meeting to overhaul the group's board.
A decision on the sale of TIM, which is the second-biggest mobile carrier in Brazil behind Telefonica's own Vivo, will not, however, be made on Thursday.
Insiders in Madrid, Milan and London say Italian authorities are concerned Telefonica might exit Telecom Italia, one of Italy's largest private sector employers, once the sale of the Brazilian crown jewel is completed.
Telecom Italia has struggled to grow in recent years because of its debt burden and an economic downturn at home in Italy.
Telecom Italia's credit rating was cut to junk status by Moody's earlier this month because of a failure to strengthen its balance sheet, making it more expensive to borrow money.
Since Telefonica and its Italian partners Generali , Intesa and Mediobanca bought into Telecom Italia six years ago, the share price of the Italian firm has fallen 70 percent and earnings declined by one quarter.
In August, Telecom Italia warned its profit would fall faster this year than it had previously thought, hit by a price war for mobile phone services and the Italian recession. ($1 = 0.7392 euros) (Editing by Will Waterman)