Glass Lewis backs Telus in Mason fight

* Canadian telecom wants to merge share classes

* Mason Capital seeking to block one-for-one consolidation

* Proxy advisor backs Telus ahead of Oct. 17 meeting

Oct 5 (Reuters) - Proxy advisory firm Glass Lewis & Co backed Telus Corp in its dispute with top investor Mason Capital Management LLC on Friday, with a report viewed by Reuters that recommended that investors approve a proposed share consolidation.

The Canadian telecom company wants to convert all non-voting Telus shares to voting shares, on a one-for-one basis. Investors will vote on the matter at an Oct. 17 meeting.

"We believe the overwhelming support from shareholders, excluding Mason, accurately depicts the value that is expected to be unlocked for long-term shareholders following the adoption of a single class share structure," said the report.

The report follows a similar recommendation from rival proxy advisor Institutional Shareholder Services, made public on Monday.

Telus has argued that creating a single class of shares will make the stock more liquid, and thus more valuable. Glass Lewis said the consolidation would likely improve liquidity and access to capital. Telus has also said that universal voting rights are a good corporate governance practice.

Mason contends that voting shareholders paid more, on average, for their stock and should be compensated as the two classes merge. In a statement on Friday, the U.S. hedge fund urged investors to reject the one-for-one exchange.

"Telus' flawed proposal would result in you giving up the premium that you paid for your voting shares and a 46 percent reduction in your voting power - with no compensation whatsoever," it said.

Telus says Mason has only a 0.02 percent stake in the company once its short position is subtracted from the shares it owns.

The fund's recent disclosure shows it has shorted 14.7 million voting shares and 18.0 million non-voting shares, while owning 32.8 million voting shares, or about 19 percent of the company. The fund would likely profit if the price spread between the two classes widens.

Telus's voting shares closed up 0.11 percent at C$63.42 on the Toronto Stock Exchange on Friday. Non-voting shares were up 0.05 percent at C$62.93.

(Reporting by Allison Martell; Editing by Tim Dobbyn)

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Keywords: TELUS MASON/