By Paola Arosio and Lisa Jucca
MILAN (Reuters) - Telecom Italia has scrapped a crucial board meeting due later this week, people with knowledge of the situation said, as it buys time to figure out a new shareholder structure that could revive its fortunes after years of underperformance.
The meeting, initially set for September 19, was expected to discuss a proposal by Spanish telecoms operator Telefonica to buy out Telecom Italia's core domestic shareholders.
Directors have so far rebuffed offers by Egyptian tycoon Naguib Sawiris and by Hong Kong-based conglomerate Hutchison Whampoa.
But Telecom Italia's management would welcome fresh cash to stave off a downgrade of its nearly 29 billion euro ($38.5 billion) debt to "junk" status and back investments needed to counteract declining margins in its Italian home market.
"Shareholders were told the planned board meeting will not take place," one of the sources said on Monday, adding that Chief Executive Franco Bernabe was not yet ready to present a new strategic plan.
A Telecom Italia spokesman declined comment.
Directors are expected to reconvene only on October 3, said two sources close to investors in Telco, the holding that controls Telecom Italia with a 22.4 percent stake.
Telefonica is the biggest shareholder in Telco, which also includes Italian banks Intesa Sanpaolo and Mediobanca, along with insurer Assicurazioni Generali.
Telco shareholders have up to September 28 to decide whether to exit their shareholder pact and several had said they wanted to see the options on the table at the September 19 meeting before taking any decision.
Telco shareholders took control of Telecom Italia in 2007 but the stock is trading at a fraction of the 2.8 euros per share they paid back then.
Shares in Telecom Italia were down 1.2 percent at 0.6 euros by 1148 GMT, underperforming a 0.9 percent rise in Milan's main FTSE MIB index.
(Additional reporting by Robert Hetz in Madrid and Danilo Masoni in Milan; Editing by David Holmes)