By Giuseppe Fonte and Elvira Pollina
ROME/MILAN (Reuters) -Shares in Telecom Italia (BIT:TLIT) (TIM) fell 5% on Wednesday after a government official said the state had no plans to launch a full takeover bid for the former phone monopoly.
Italy's government said this week it would seek to find by the end of this year "the best market-friendly options" for struggling TIM, placing a planned bid for the phone group's grid by state lender CDP on hold.
"Talking about a full takeover is pure fantasy," cabinet undersecretary Alessio Butti said at a business event in Rome, referring to recent press reports on his plans for TIM.
On the sidelines of the event, Butti, who oversees the government's strategy on broadband, confirmed that the government's goal was securing control of TIM's grid, adding it still needed to define how to do it.
In a statement issued to clarify his remarks late on Wednesday, Butti reiterated that "talking about a full takeover of TIM is pure fantasy as for now".
But he added that "if that were the case, the instruments and modalities would be identified in due course by the parties in the field".
Butti had previously called on CDP to take over TIM as part of a strategy to build a national broadband champion.
For its part, TIM said it remained open to discussions with the government over plans for its network, adding it would also press ahead with a strategy centred on asset spinoffs to cut debt.
Italy wants to improve the speed and reach of broadband services across the country, while also seeking to help get debt-laden TIM, which employs more than 40,000 people, on a more sustainable footing.
CDP, Macquarie Asset Management and Open Fiber earlier confirmed they would not submit a bid for TIM's network grid by the deadline scheduled on Wednesday.
Championed by the previous government of Prime Minister Mario Draghi, the offer was part of a broader project to combine TIM's network assets with those of smaller rival Open Fiber to create a national broadband champion under CDP's control.