Telecom Italia has scrapped a crucial board meeting this week, as it buys time to try and figure out a new shareholder structure. For years the company has underperformed and has been crippled by debts. As a result the entire Italian telecoms infrastructure which rests on it has become increasingly out of date.

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. So far TI has laughed off offers by Egyptian tycoon Naguib Sawiris and by Hong Kong-based conglomerate Hutchison Whampoa.

However Telecom Italia's management needs fresh cash to stave off a downgrade of its nearly $38.5 billion debt to "junk" status and back investments needed to counteract declining margins in its Italian home market.

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 includes Italian banks Intesa Sanpaolo and Mediobanca, along with insurer Assicurazioni Generali.