UPDATE 1-Pirelli could buy Telefonica shares -report

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MILAN, April 30 (Reuters) - Pirelli (PECI.MI) could buy Telefonica (TEF.MC) shares with cash left after investments from money made in its Telecom Italia (TLIT.MI) deal with the Spanish company and Italian banks, its chairman told a newspaper.

Pirelli "will invest (the 3.3 billion euros from the deal) in our core sectors. We have big projects ... and with what's left over, I will buy Telefonica shares," Marco Tronchetti Provera told La Stampa newspaper in an interview published on Monday.

Telefonica, banks Mediobanca (MDBI.MI) and Intesa Sanpaolo (ISP.MI), insurer Generali (GASI.MI) and Italy's Benetton family agreed on Saturday to buy Olimpia from Pirelli for 4.1 billion euros ($5.58 billion).

Pirelli owns 80 percent of Olimpia, a holding company that controls Telecom Italia with an 18 percent stake. The Benetton family owns the remaining 20 percent of Olimpia.

The agreement gives Telefonica, the world's fifth-largest telecoms group, an indirect 10 percent stake in Telecom Italia, Italy's former state telecoms monopoly which is worth about 41 billion euros.

Pirelli's core business after selling its Olimpia stake reverts to tyres and cables.

Pirelli had been discussing a sale of Olimpia to Mexico's America Movil (AMXL.MX), after the latter's partner AT&T (T.N) pulled out citing government interference.

Prime Minister Romano Prodi had pressured Italian banks to come up with a solution to keep control of the country's biggest telecoms operator in domestic hands.

"I'm amazed at some of the comments which say the government had too much influence," Prodi said, according to comments reported by Italian news agency ANSA on Sunday.

"It's really incredible, because in any other country in the world, there would have been much more influence, a much greater

(government) presence."

((Reporting by Jo Winterbottom, editing by Quentin Bryar; Milan newsroom +39 02 66129 507, fax +39 02 801 149, milan.newsroom@reuters.com))

($1=.7345 Euro) Keywords: PIRELLI/ TELEFONICA

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