UPDATE 2-AT&T looks to sell Japan outsourced svcs unit-sources

* AT&T pulling back from Japan market

* Potential sale comes after U.S. acquisitions

* Unit for sale generates about $500 mln in annual revenue (Adds analyst comment, AT&T declines to comment)

BEIJING/TOKYO, Dec 15 (Reuters) - AT&T Inc T.N is looking to sell its outsourced services business in Japan, in a pullback for the U.S. giant from Asia's largest telecommunications market, according to two sources familiar with the situation.

The business for sale generated about $500 million in annual revenue, and was 15 percent owned by Nippon Telephone & Telegraph 9432.T, one of Japan's top telecoms carriers, said the sources, speaking on condition of anonymity because of the situation's sensitivity.

AT&T declined to comment.

It was not immediately known which companies might be interested in the assets, although some have speculated that NTT might be interested in buying out the business.

AT&T acquired the assets from IBM IBM.N when it bought IBM's global network business. It is one of the few big names that has tried offering services on a global basis, alongside U.S. rival Verizon VZ.N and Britain's BT Group BT.L .

The effort to pull back in Japan comes as India's Reliance Communications RLCM.BO is looking to sell its undersea fiber-optic network and U.S. network businesses, which are assets that may interest AT&T or Verizon, according to analysts. Reliance is hoping to raise around $3 billion in cash as it also focuses on its domestic market, sources told Reuters this week. [ID:nTOE5BD06K]

Piper Jaffray analyst Christopher Larsen said AT&T might favor faster-growing markets like India over well-established telecom markets like Japan. But he noted that the Reliance assets could appeal equally to AT&T and Verizon.

“Getting into the Indian market has the potential to be really good because it has higher growth rates than the U.S. and other developed nations and because of the growing amount of U.S.-to-India telecom traffic.”

Greenhill & Co was advising AT&T on the potential Japan asset sale, according to one of the sources.

A deal would follow recent acquisitions for its U.S. wireless business, as it focuses on the lucrative U.S. market in favor of tougher international markets where it must compete with well established local players.

Earlier this year the company paid $2.35 billion for the bulk of the Alltel Wireless assets being divested by Verizon, which Verizon was required to sell as a condition for regulatory approval of its purchase of Alltel.

Last month, the U.S. telecommunications regulator also gave final approval for AT&T’s $944 million bid to buy Centennial Communications Corp. [ID:nN059003]

The Federal Communications Commission’s move was widely expected after the U.S. Justice Department approved the deal on condition that AT&T, the No. 2 U.S. wireless provider, divest Centennial operations in parts of Louisiana and Mississippi. (Additional reporting by Sinead Carew in New York; Editing by Chris Lewis, Dave Zimmerman)