UPDATE 2-Ecuador strips America Movil of mobile concession

(Recast, adds analyst's quote, details and byline)

By Alexandra Valencia

QUITO, April 29 (Reuters) - Ecuador stripped America Movil (AMXL.MX) of a major operating concession on Tuesday, rejecting the Mexican mobile telecom giant's terms for renewing its contract as the leftist government tightens control over the economy.

The failure to strike a deal in negotiations reflected a tougher stance from President Rafael Correa in his drive to rework foreign deals in the oil, mining and telecommunication sectors, analysts said.

America Movil (AMX.N), the country's largest mobile operator, had been seeking to extend its concession by 15 years, with Ecuador wanting it to pay around $480 million and improve services to clients.

"We did not reach an agreement," Jaime Guerrero, head of the country's telecommunications regulator Senatel, told Reuters. Guerrero said the government will gradually take over the company's concession. Later in a statement the government assured the firm's seven million customers their service will not be disrupted.

"It's a surprise as Correa has so far been tempered in his approach and investors had concluded that his government's bark was worse than its bite, but this is evidence that he plans to follow a different path," said Gianfranco Bertozzi, an analyst with Lehman Brothers in New York.

"I take this as a sign of things to come," he added.

Correa, a leftist former economy minister, had warned that if mobile firms did not meet government expectations in negotiations they could leave the country and their concessions would be offered to other cell-phone operators.

An America Movil spokesman was not immediately available for comments. The concession for the company's local unit Porta is due to expire in August.

Investors have long feared Correa, who took office over a year ago, was going to follow into the foot steps of ally Venezuelan President Hugo Chavez who has nationalized parts of his OPEC nation's economy in his drive to establish socialism.

But Correa's softer tone in earlier negotiations to rework oil deals and timely payment of the country's foreign debt had dissipated some of those fears.

Spain's Telefonica (TEF.MC) has already reached an agreement with Ecuador to renew its deal for 15 years.

America Movil and Telefonica are the two largest mobile operators in Latin America and have long fought for supremacy in the region.

Together, the companies control 95 percent of Ecuador's market of more than 10 million subscribers, though the country represents a small part of both their overall subscriber bases. (Writing by Alonso Soto; Editing by Lincoln Feast)