Cesar Alierta (pictured), Telefonica’s CEO, stepped down from Telecom Italia’s board in the hope of diffusing a row over an alleged conflict of interest in Brazil where the two operators compete.

Julio Linares, a former chief operating officer at Telefonica, joined Alierta in resigning from the Italian incumbent’s board.

Both departures come into effect immediately.

The two resignations come on the heels of Cade, Brazil’s anti-trust watchdog, turning up the heat on Telefonica.

Aggrieved that the Spanish and Latin American operator had broken a 2010 agreement not to raise its stake in Telecom Italia, the parent company of TIM Brasil – which is the second-largest mobile operator in Brazil – Cade ruled that Telefonica must either exit its stakeholdings in TIM Brasil or get a new partner for its Vivo mobile subsidiary.

Vivo, controlled by Telefoncia, is the largest mobile operator in Brazil.

Combining its Vivo interest with direct and indirect stakeholdings in Telecom Italia, Telefonica controls more than half the mobile market in Brazil – something which Cade wants to redress.

For good measure, Cade slapped a BRL15 million ($6.3 million) fine on Telefonica for raising its stake in Telecom Italia, as well as fining TIM Brasil BRL1 million.

“Alierta and Linares’s move makes sense as it not only addresses immediately Cade’s decision but also tries to prove to Italian market regulator Consob that Telefonica isn’t in a conflict of interest,” Andrea Giuricin, a professor who specialises in media and telecommunications at Milan Bicocca University, told Bloomberg in a phone interview.

Cade reportedly wants to trim back Telefonica’s position in Brazil’s mobiile market to its pre-2010 level.

At that time Telefonica held half of Vivo and a minority stake in Telco (the company that owns 22.4 percent of Telecom Italia).

By increasing its Telco stake, however, Telefonica gained effective control of the Italian incumbent.

Sensitive to the perceived conflict of interest, Bloomberg reports that Alierta and Linares used to leave the room when Brazil was discussed during Telecom Italia board meetings.

How far the two boardroom resignations will diffuse the row is unclear. Telefonica is still reportedly considering taking legal action to stop Brazil’s authorities from forcing the operator to loosen its grip in the country.

Shareholder shuffling?

The exit of Alierta and Linares comes at a time of shareholder wrangling at the Italian incumbent.

Telecom Italia shareholders are due to meet on 20 December to vote on a motion by Marco Fossati’s Findim Group, a minority investor (holding about 5 per cent equity).

The motion is an attempt to remove the current board, stating that Telefonica and its Telco partners have too much influence over the Italian operator.

There also seems to be some confusion as to how much equity BlackRock – the world’s biggest investment manager – holds in Telecom Italia.

BlackRock, in an email sent today (16 December),  and cited by Bloomberg,  said it had a 7.78 per cent stake in Telecom Italia as of yesterday.

An SEC filing dated on 9 December, however, showed BlackRock holding a 10.14 per cent stake.

The investment firm said the discrepancy was due to some bonds that can be converted into Telecom Italia shares.

BlackRock maintained these aren’t relevant to disclosure obligations (needed when individual stakes rise above 10 per cent) because the shares into which the bonds will be converted haven’t yet been issued.