* State bank KfW has invited banks to pitch for deal - sources
* Preparations for potential placement at early stage - sources
* Germany owns 31.9 pct of Deutsche Telekom
By Philipp Halstrick and Arno Schuetze
FRANKFURT, Feb 5 (Reuters) - The German government is considering selling shares in Deutsche Telekom to cash in on the stock's 45-percent rise over the past year, two people familiar with the matter said.
Germany has a 31.9 percent stake in the former monopoly, worth about 16 billion euros ($22 billion), with 17.4 percent of that held by state development bank KfW.
The sources told Reuters that KfW had invited banks to make proposals for a share placement.
"Now is the perfect time to place some Deutsche Telekom shares," a third source said.
"Valuations are high, elections are done, MetroPCS deal is done. So all set," the source said, referring to MetroPCS's merger with Deutsche Telekom's T-Mobile.
Shares in Deutsche Telekom turned negative on the news, trading 0.8 percent lower at 11.41 euros by 1529 GMT and underperforming a 0.6 percent decline for the STOXX Europe 600 Telecommunications index.
The two sources said Berlin's preparations were at an early stage, and it was not yet clear whether or when a placement could take place. One of them said a sale was more likely to come by mid-year than within the coming weeks.
Deutsche Telekom, KfW and the finance ministry declined to comment.
To sell any shares in Deutsche Telekom, a number of steps would still need to be taken at the finance ministry that oversees the holding, and ministerial as well as coalition approval would be needed.
Any deal would be the first placement of Deutsche Telekom shares by the German government since it sold some for 14.57 euros per share in 1996.
Since then, the stock has lost more than 20 percent of its value, but it has gained almost 45 percent since hitting a 52-week low almost a year ago, outperforming the telecoms sector.
Appetite for the stock has grown since Deutsche Telekom turned around its U.S. business last year. T-Mobile US, of which Deutsche Telekom owns 67 percent, has been poaching customers from larger rivals in recent quarters and is growing again after 4 years of losing ground.
At the same time, third-placed mobile operator Sprint, backed by Japan's Softbank, has been studying a bid for Deutsche Telekom's T-Mobile US to bulk up.
A rally in European telecom stocks over the past months has closed the big valuation gap with U.S. peers seen early last year, boosted by a series of telecoms and cable industry deals last year.
This has fuelled speculation that competition regulators will loosen the leash on mobile firms wanting to merge to encourage the investment needed for Europe to catch up on building faster broadband networks.
In February last year, the transatlantic gap in telecoms valuations was at its widest since 2008, with the European sector trading at just below 10 times forecast earnings compared with a multiple of 17.6 times for U.S. peers. Now, the ratios are at 14.9 times forecast earnings for Europe and 13.6 for the U.S, according to Thomson Reuters data.