MILAN—Telecom Italia's board proposed on Thursday a share conversion that, if approved, would lead to a dilution of its current shareholders, the company said.

As a result of the operation, French firm Vivendi SA's stake in the Italian firm would go down to about 13% from the current 20%. The operation would bring to a conversion of the savings shares into ordinary shares. As savings shares are about 30% of the total capital, it would lead to a dilution of about 30% of all shareholders.

Holders of savings shares don't have voting rights.

A spokesman for Vivendi declined to comment.

Telecom Italia will get more than €500 million ($545.9 million) of cash flow coming from the conversion, a source close to the operation said. The Italian firm said that the aim is to increase the free float and simplify its capital structure.

Holders of savings shares would have the right to convert them into ordinary ones, plus a payment of €0.95 for each savings share. Savings shares which aren't voluntarily converted will be subject to a mandatory conversion with a ratio equal to 0.87 ordinary share for each saving share held.

If approved in the next shareholders' meeting, the conversion is expected to become effective before the distribution of the 2015 dividends, the company said.

Write to Manuela Mesco at manuela.mesco@wsj.com

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(END) Dow Jones Newswires

November 05, 2015 14:25 ET (19:25 GMT)

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