UPDATE 2-Telecom Italia asks state financier to buy network stake - source

Fri May 3, 2013 1:17pm EDT

* Term sheet foresees sale of stake in newly created company

* Telecom mulls listing of stake of network company-sources

* Telecom says idea of any done deal premature

* Fixed-line network could be worth 12-15 bln euro

* Shares rise 1 percent (Recasts with source on term sheet, sources on possible listing)

By Luca Trogni and Stefano Rebaudo

MILAN, May 3 (Reuters) - Telecom Italia has asked state financing body CDP to buy a stake in its fixed-line network, a source with knowledge of the deal said, in a move that could smooth a tie-up between the Italian firm and Hong Kong's Hutchison Whampoa.

The source said Telecom Italia had sent CDP a draft proposal suggesting it purchase a stake in a yet-to-be-created new network company via the Fondo Strategico Italiano (FSI), a fund controlled by the CDP.

In April Telecom Italia asked a panel of directors to look at a possible tie-up with Hutchison which would include merging its 3 Italia mobile unit into Telecom Italia.

To fend off objections from the government about national networks falling into foreign hands, Telecom Italia at the same time asked its management to look into the feasibility of spinning off the network, which according to some analyst estimates could be worth 12-15 billion euros ($16-20 billion).

"Telecom Italia sent a draft term sheet to the CDP yesterday," the source told Reuters, without elaborating on the details.

A second source said Telecom Italia was also considering a possible listing of a stake in the newly created network company, adding this could happen before the completion of a deal with CDP.

Il Messaggero newspaper reported Telecom Italia was thinking of selling 15-20 percent of the network company to FSI and floating an extra 30-40 percent on the Italian Stock Exchange.

The future of the network will be discussed on May 8 at a board meeting which is also due to decide whether to pursue talks with Hutchison, which is seeking control of the former state-owned Italian telecoms monopoly.

Telecom Italia said in a statement on Friday it was too soon to talk about a done deal regarding the network or a partnership with other players.

"At present, any presumed conclusion of an agreement with possible mobile or fixed-line partners, company reorganisation or the prospective listing of a "Network Company" are to be considered premature and the subject of mere speculation," a company spokesman told Reuters in an emailed statement.

STRATEGIC ASSET

Italian politicians have voiced opposition to foreign ownership of the fixed-line network, an asset deemed to be of strategic national importance. Rome holds special powers over Telecom Italia and can veto M&A operations.

A sale of part or all of the network to the state-backed fund could help dispel political concerns, which are seen as a major hurdle to any deal with the Hong Kong-based group.

A senior banker not involved in the negotiations said a partial listing of Telecom Italia's network was the most likely option as it would allow the company to cut debt now exceeding 28 billion euros.

It was not clear whether Telecom would retain a majority stake in the network.

Sources with knowledge of the negotiations have said a deal with Hutchison would see the Hong Kong group buy Telecom Italia's shares from investor vehicle Telco, the biggest shareholder in the Italian company with a 22.4 percent stake.

However, one of those sources said on Friday one option under consideration was for Hutchison to become a shareholder of Telco through a capital increase.

Telco is owned by Spain's Telefonica and Italy's financial institutions Mediobanca, Generali and Intesa Sanpaolo.

Shares in Telecom Italia closed 1 percent higher at 0.65 euros.

($1 = 0.7649 euros) (Additional reporting by Stephen Jewkes, Sophie Sassard and Arno Schuetze, writing by Danilo Masoni; Editing by Sophie Walker and Paola Arosio)