EU okay for News Corp Italy bid due July 20-source

* News Corp set to win EU approval for frequency bid

* To compete with Mediaset in digital terrestrial TV

By Foo Yun Chee

BRUSSELS, July 9 (Reuters) - Rupert Murdoch's News Corp (NWSA.O) will win EU antitrust approval on July 20 to bid for an Italian digital terrestrial television frequency, a person with direct knowledge of the situation said on Friday.

Gaining access to the frequency would allow News Corp to compete further against Italian Prime Minister Silvio Berlusconi's Mediaset (MS.MI), its pay-TV rival.

News Corp, owner of the Fox broadcast and cable networks, the Twentieth Century Fox movie studios and newspapers including The Wall Street Journal and The Sun, agreed in 2003 not to move into this market until the end of 2011.

The pledge helped it to secure approval from the European Commission for its takeover of Italian pay-TV company Telepiu. Sky Italia, News Corp's satellite unit, later asked the Commission to scrap the restriction.

"The (Commission's) decision is set for July 20," the person said. The Commission, the 27-country European Union's executive arm, will hold its last regular weekly meeting on July 20 before it recesses for the summer holiday. The person declined to be identified because of the confidentiality of the issue.

A Commission spokeswoman declined to comment.

A source familiar with the situation had told Reuters in April that the EU competition watchdog would allow News Corp to bid for one frequency and to use it only for operating free-to-air channels. [ID:nLDE63S1IH]

Mediaset, state-owned RAI and small broadcasters, backed by the Italian government, are against Sky taking part in Italy's last sale of digital terrestrial television assets, saying the market is still not open enough. (Editing by Dale Hudson)