* Share sale or disposal of Brazil unit seen as main options
* Bernabe wants to pursue investment plan
* Some core investors looking to sell to Telefonica
* Decision expected by Oct. 3 board meeting
By Danilo Masoni and Stefano Rebaudo
MILAN, Sept 19 (Reuters) - Telecom Italia ChairmanFranco Bernabe and core shareholders failed in hastily-convenedtalks on Thursday to bridge differences on how to relaunch thedebt-laden group ahead of a board meeting early next month.
Bernabe wants investors to commit to an investment plan thatcould be worth around 3 billion euros ($4 billion), designed toreverse years of lacklustre growth and fend off a credit ratingdowngrade, sources with knowledge of the situation said.
But influential shareholders do not want to pour more moneyinto the loss-making investment, with some exploring the optionof selling their shares to fellow investor Telefonica ahead of the Oct. 3 board meeting, the sources said.
"The situation is still in flux and no decision has yet beentaken on the shareholder structure," one of the sources said."The meeting on Oct. 3 will be decisive."
Telecom Italia has made no comment on the talks, which werecalled unexpectedly at the company's offices in Milan after aplanned board meeting had earlier been cancelled.
Directors were also tight-lipped on the meeting, which wasattended among others by board member and Telefonica CEO CesarAlierta.
Tarak Ben Ammar, another director, tried to defuse tensionby saying the crisis meeting had been "a lunch among friends."
While Bernabe, who has been at the helm of Telecom Italiasince 2008, backs a capital increase to fund investment, coreinvestors appear to prefer disposals, the sources told Reuters.
Some shareholders have privately expressed disappointmentover Telecom Italia's strategic plans as it grapples withrecession at home and slowing growth in Brazil.
"The shareholders are against a new capital hike, they wantBernabe to present a new business plan which guarantees theviability of the company. If Bernabe needs money, he has todivest," the source familiar with the situation said.
Telecom Italia's main source of growth is its Brazilianmobile arm Tim Participacoes, which has a stockmarket value of some $11 billion.
SOURCES OF FINANCE
Telecom Italia has struggled to grow because of its 29billion euro debts and falling margins. It needs to find othersources of financing after directors rejected two attempts byBernabe to bring in new investors.
Any decision on strategy is complicated because coreshareholders, bound together in a holding company called Telcothat owns 22.4 percent, have to say by Sept. 28 if they want toexit their pact early and ditch their stakes.
Otherwise the pact runs to 2015.
Telco's largest investor Telefonica has offered 800 millioneuros to buy some shares from Italian partners Generali, Mediobanca and Intesa Sanpaolo. But the offer was rejected, according to daily Il Sole 24 Ore.
A cash call could open the door to a new investor.
Telecom Italia and Telefonica declined to comment. Generaliand Mediobanca had no immediate comment.
Analysts see AT&T, Egyptian tycoon Naguib Sawiris andcash-rich Vodafone as possible predators in a shake upof the sector expected to be triggered by Vodafone's $130billion exit from its U.S. wireless investment.
But the board of Telecom Italia has already rejected a 3billion euro cash injection offer from Sawiris and a mergerproposal from Hong-Kong-based Hutchison Whampoa.
Intesa Chairman Gian Maria Gros-Pietro said on Thursday onlythat the bank was open to any solution that would benefitTelecom Italia, its investors and creditors.
In August Telecom Italia warned its 2013 profit would fallfaster than expected, prompting rating agencies to threaten adowngrade to "junk" status.
Telco investors took control of Telecom Italia in 2007,before the global financial crisis, paying shares 2.8 euroseach. The stock is now worth 0.59 euros.
Vodafone (VOD)
