* Telefonica looking for 5.50-6.00 eur/shr - sources
* Order books well covered within new range - source
* Offering to raise up to 1.55 bln euros
By Alexander Hübner and Arno Schuetze
FRANKFURT, Oct 26 Telefonica SA has narrowed the indicative price range for the listing of its German O2-branded subsidiary, four people close to the process told Reuters.
In a sign that Germany's biggest initial public offering in five years remains on track, the Spanish group has told investors it is looking at selling shares for 5.50 to 6.00 euros apiece, the sources said.
That compares with a 5.25 to 6.50 euro range set earlier this month.
"The books are well covered within this (new) range," one of the sources said.
Europe's largest telecoms company by revenue hopes to raise around 1.5 billion euros ($1.9 billion) by selling part of its O2-branded German subsidiary, aiming to cut its 57 billion euro debt pile and hang on to its prized investment-grade rating.
O2 Germany - the biggest listing there since Tognum raised 2 bln in July 2007 - joins a growing list of European companies looking to take advantage of a more positive climate for new stock offerings.
After months of inactivity, the European market for new listings has shown signs of life in recent weeks, with British insurer Direct Line and Germany's Talanx among those whose shares have risen on stock market debuts.
Telefonica will close the order books on its offering at 1300 GMT on Monday and will then decide on the final pricing. The shares are expected to begin trading on Oct. 30.
Based on the new range, Telefonica would raise between 1.42 and 1.55 billion euros.
NOT AT ANY PRICE
While bankers are saying there is strong investor demand for the shares, investors are predictably looking for a good deal.
"We are very price sensitive when it comes to O2 and are bidding at the lower end of the offering," said Andreas Mark, a fund manager at Union Investment, adding: "You don't have to own the stock at any price."
Neil Wilkinson at Royal London Asset Management said: "It's reasonably small in terms of the free float (of readily tradeable shares) and it's just not significant or material enough for us to pay a huge amount of attention to."
In Germany, O2 is the smallest mobile operator with roughly 16.4 percent of subscribers, trailing Deutsche Telekom , Vodafone and KPN's E-Plus. Some analysts have said its targeted valuation was high compared with peers.
Some investors, however, have pointed at the positive aspects of the company.
"Germany remains the more robust consumer market in Europe and therefore from a mobile phone point of view, probably the more attractive market," said Gavin Launder, fund manager at Legal & General European Trust.
As part of the transaction, Telefonica will offer 225 million shares and a "greenshoe" or overallotment option, of 33.75 million shares.
Telefonica and IPO organisers JP Morgan and UBS declined comment.