* Telecom says Sawiris interested in buying newly issued shares
* Sawiris confirms, calls reports of 5 bln euros "excessive"
* Shares rise to three-week high
By Danilo Masoni
MILAN, Nov 12 Egyptian tycoon Naguib Sawiris has offered to buy a stake in Telecom Italia, he and Italy's largest telecoms company said on Monday, in the latest sign of interest from emerging-markets investors in struggling euro zone companies.
The heavily indebted Italian group said a document from Sawiris was read out at a board meeting on Thursday. In a statement, it added that management was still reviewing the offer to put in fresh cash in return for an issue of new shares.
Telecom Italia did not say how much Sawiris might invest and the Egyptian described as "excessive" reports he might offer up to 5 billion euros ($6.4 billion) - at current prices that would buy more than a third of the firm and so force a outright bid.
Telecom Chairman Franco Bernabe told reporters in Turin that Sawiris's interest showed "there is important value in the company". He added: "We are pleased about this."
A spokeswoman for Sawiris told Reuters in Cairo that he had "expressed an interest" but called the press reports that he would invest up to 5 billion euros "inaccurate and excessive".
By entailing a capital increase, the Egyptian tycoon's offer could prove unappealing to existing investors, which include Telefonica and some of Italy's biggest financial names, as they would find their stakes in Telecom Italia being diluted.
Two sources close to the matter said the proposed investment would be for less than 5 billion euros, which based on Friday's market value would buy a 38 percent stake in Telecom Italia - well above the 30-percent threshold which would trigger a mandatory takeover bid from Sawiris under Italian law. "Sawiris has approached Telecom Italia directly for talks," a banking source said. "There are no banks involved in the process, which is preliminary at the moment, and talks are on for Sawiris to take a minority stake.
"He is a dealmaker himself, with a lot of experience in working on tough situations in the telecoms space and probably sees an opportunity in turning around the company."
An influential figure in Egypt since the Arab Spring revolt that toppled Hosni Mubarak last year, Sawiris has previously been involved in Italy's telecommunications market through Wind, the third biggest mobile phone operator in the country.
However, he sold Wind together with most of his telecom assets to Russia's Vimpelcom last year for $6.5 billion. He also sold a stake in Telekom Austria to Mexican billionaire Carlos Slim's America Movil in June.
Since then Sawiris has indicated an interest in fresh investments in European telecoms, which have seen valuations fall sharply over the past year as recession, price competition and regulatory pressure have all helped depress profits.
The sector's troubles have opened the door to emerging market investors seeking new footholds in Europe, such as Sawiris and Mexico's Slim, who also bought a 27-percent stake in Dutch group KPN in June. [ID: nL2E8HSCS2].
Several former telecom monopolies, such as Telefonica and KPN, have cut dividends to pare debt, while Telecom Italia has been looking to sell assets such as its media unit.
The Italian company, which is facing pressure on sales and margins due to a deep recession at home, is burdened with a net debt of 29.5 billion euros, which it hopes to cut by 4.5 billion euros by the end of next year. However, rating agency Fitch said on Monday that the debt target may be difficult to achieve because of weak operating trends.
Telecom Italia shares have fallen 18 percent in the past six months. At 1250 GMT, the stock was up 5 percent at 0.7255 euros, after having hit its highest level in three weeks.
Telecom Italia is controlled by an unlisted holding company, Telco, which owns 22.4 percent. Telco's shareholders comprise Spain's Telefonica and Assicurazioni Generali , Mediobanca and Intesa Sanpaolo of Italy.
Telecom Italia's board "reacted coldly" when it was informed about Sawiris's offer, a source close the matter told Reuters.
However, an industry source familiar with the situation said the offer could be met with favour by chairman Bernabe, who is keen to limit the influence of existing shareholders.
Telecom Italia's shareholders have had to repeatedly write down the value of their stakes in the past year and, according to one of the sources, are keen to see a firm commitment by Bernabe to spin off Telecom's 15-billion-euro fixed-line business. Telecom is currently in talks to sell a stake in the network to state-owned financial holding company CDP.
"In combination with abysmal numbers, and a company that has no credible plan for turnaround, these approaches must force Telecom Italia stakeholders to review their options, either embrace Mr. Sawiris or push management closer to the arms of a deal with the CDP," said Bernstein analyst Robin Bienenstock.