Telecom Italia welcomes foreign investors as Vivendi entry looms

* Chairman welcomes investors who bring capital, know-how

* Telecom wants to stay in Brazil with leading role

* Telecom looks at Sky (Other OTC: BSYBF - news) , Mediaset (Other OTC: MDIUY - news) , Netlix for content (Adds vote outcome on new board election rules, CEO quote on Vivendi)

By Danilo Masoni and Stefano Rebaudo

ROZZANO, Italy, May 20 (Reuters) - Telecom Italia (Other OTC: TIAJF - news) 's chairman said he welcomed foreign investors in the Italian phone company as French media group Vivendi prepared to become the largest shareholder.

Shareholders at the former Italian telecoms monopoly also approved changes to board appointment rules that could ensure minority investors get greater representation.

"We reject the logic that foreign investments in Telecom Italia are dangerous: whoever brings capital and know-how contributes to make our company stronger, regardless of whether the investor is Italian or a foreigner," Chairman Giuseppe Recchi told shareholders.

Vivendi, focusing on pay-TV and music after selling off a series of assets, was set to obtain a 8.3 percent stake in Telecom Italia after agreeing to sell its Brazilian unit GVT to Telefonica in a deal which is expected to close this month.

Vivendi's intentions remain unclear.

Last week its CEO said that acquiring the stake in Telecom Italia was opportunistic and the French group had no plans to re-enter the telecoms sector.

"Pending ownership developments, the relationship with (Vivendi Chairman Vincent) Bollore (Other OTC: BOIVF - news) today is that with a big media company," Telecom Italia CEO Marco Patuano told reporters.

Asked whether the entry of Vivendi could trigger a board and management reshuffle, he said it was not up to the management to discuss the topic.

NEW SYSTEM

If Vivendi does decide to play an active role, it will be governed by new rules. Under the new system, which shareholders are expected to approve on Wednesday, directors representing the main investor group will have only two thirds of the board seats, against four fifths currently.

The current board's tenure expires in 2017, having been appointed last year following a proposal from Telco, an investment vehicle led by Telefonica and three Italian financial institutions.

The Spanish phone company and its Italian partners Generali (Swiss: ASG.SW - news) , Mediobanca (Milan: MB.MI - news) and Intesa are dismantling Telco and have taken steps to sell their 22 percent stake, leaving Vivendi as the biggest investor.

On Wednesday, French state-owned financial institution Caisse des Depots et Consignations surprisingly emerged among Telecom Italia investors present at the annual shareholder meeting with a stake of 0.61 percent.

Investors are keen to know whether Telecom Italia, whose CEO Patuano has cut dividends and sold non-core assets to help fund investment and return to growth, will change its strategy once its shareholder base changes.

Key issues for the debt-laden company are the possible sale of its controlling stake in Brazilian mobile phone operator TIM Participacoes and a possible acquisition of Italian broadband firm Metroweb.

On Wednesday, Recchi said Telecom Italia wanted to stay in Brazil, which accounts for a third of revenue.

On the group's broadband strategy, Patuano said Telecom would be an open distribution platform for top content providers such as Sky, Mediaset and Netflix (Xetra: 552484 - news) . (Editing by Keith Weir and David Holmes)