UPDATE 1-Hungary's 4iG to buy Magyar Telekom's T-Systems

* Transaction expected to close this year

* 4iG has grown rapidly through state contracts

* Says T-Systems deal is milestone in expansion drive

BUDAPEST, July 9 (Reuters) - Hungarian information technology company 4iG has signed a preliminary deal to buy its bigger rival T-Systems, which is owned by Magyar Telekom.

The deal was announced by the companies in a stock exchange filing on Tuesday, with 4iG’s CEO and largest shareholder Gellert Jaszai saying it represents a milestone in the expansion drive flagged by the company last month.

Our growth can gain further impetus from a potential strategic partnership with Magyar Telekom after the T-Systems deal closes, Jaszai said in a statement.

The price and other financial details were not disclosed and the deal, which is expected to close this year, does not include the segment of T-Systems focused on sales to small and medium-sized businesses.

Magyar Telekom is Deutsche Telekom’s majority-owned Hungarian business.

Shares in 4iG, which provides IT services including hardware and systems management, jumped more than 7.5% after the announcement.

CEO Jaszai took control of 4iG last month by agreeing to buy a 40% stake from Hungarian tycoon Lorinc Meszaros, a childhood friend of Prime Minister Viktor Orban.

Orban, who has been in power since 2010, has used growing influence in Hungarian business life to promote a nationalist agenda labelled by his ruling Fidesz party as the “System of National Cooperation”, or NER, which has come to dominate a host of industries.

Jaszai told Reuters last month that 4iG planned to grow through debt-fuelled acquisitions in the central European region.

The state is directly involved in several of Hungary’s business sectors, including information technology, and the government has said it plans to participate in a 5G network rollout valued at as much as 700 billion forints ($2.4 billion).

4iG reported 56% growth in revenues in the first quarter, largely thanks to a string of state contracts secured after Meszaros acquired a stake in June 2018.

Magyar Telekom shares were up 1.8%, outperforming a 0.7% rise for the Budapest bourse’s main BUX index. (Reporting by Krisztina Than Editing by David Goodman)