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By Alberto Sisto and Paolo Biondi
ROME (Reuters) - Renewed signs of foreign bid interest in Telecom Italia emerged on Friday just as its board met to discuss the company's options after after failing to expand in Brazil and hitting setbacks in its attempt to exit from Argentina.
At the top of the meeting's formal agenda was the sale of its controlling stake in Telecom Argentina to investment company Fintech, a $960 million (590.84 million pound)deal the Italian group agreed nearly a year ago which has been thrown into question because it has not yet been cleared by regulators.
Telecom Italia said after a 7-hour board meeting on Friday that it had extended a deadline to complete the deal by another month, to Oct. 24, and that its management would negotiate with Fintech changes to the initial agreement so as to buy more time in the face of regulatory uncertainty.
However, the bigger issue at Telecom Italia is how the company contends with the increasing pace of industry consolidation as telecom companies seek to bring together fixed and mobile services, both in Europe and in Brazil, where it controls the country's second-biggest mobile operator, TIM Participacoes.
On Friday the head of an Italian company controlled by Naguib Sawiris, the Egyptian tycoon and former owner of Wind, Italy's third-biggest mobile operator, said he was still interested in investing in Telecom Italia, despite having an offer rejected in 2012 to buy a stake for 3 billion euros.
Adding to the air of intrigue around European's ninth largest telecoms group, Raffaele Tiscar, a top official at the Italian prime minister's office, said he had met U.S. businessman Sol Trujillo to discuss Telecom Italia.
On Thursday a report by Bloomberg said Trujillo, the former chief executive of Australian telecoms group Telstra, is seeking to raise 7.5 billion euros to bid for a stake in the Italian group.
"I've seen Trujillo as I see many others," Tiscar told Reuters.
A senior investment banker said it was not the first time Trujillo had moved to approach Telecom Italia, but doubted that this would translate into a serious proposal.
Telecom Italia's increasingly fragmented shareholder base is making it a more vulnerable takeover target.
"That Telecom is up for grabs is clear," a government source said on Friday. "It could even happen rather quickly."
Board member Tarak Ben Ammar, on his way out from the board meeting, said Telecom Italia is not up for sale, although he added that "whoever brings in cash is welcome."
On Trujillo's possible bid plan, he said: "That is a proposal that probably comes from Disneyland in the sense that we don't know anything about it".
FROM HUNTER TO PREY
Telecom Italia has been forced to regroup after losing out to Telefonica in the $9 billion bidding battle for Vivendi's telecoms business in Brazil, GVT.
Burdened with more than 27 billion euros of net debt, in need of cash to carry out costly network upgrades and lacking a clear direction, Telecom Italia has once again turned from hunter to potential prey, several investment bankers have told Reuters.
But, as in the past, there is no straghtforward outcome to that scenario.
The Italian company's board has rejected approaches both from Sawiris and Hong Kong's Hutchison Whampoa in the past two years.
And a year ago sources told Reuters that AT&T and Mexican billionaire Carlos Slim's America Movil, who had already unsuccessfully tried to take over Telecom Italia in 2007, could be interested in taking a stake.
Meanwhile the shareholder structure is changing, making the company an easier target for potential bidders.
Telefonica, which is still Telecom Italia's largest indirect shareholder with a 14.8 percent interest, is selling out, with an 8.3 percent stake going to Vivendi as part-payment for GVT, and the balance covered by an exchangeable bond which Telefonica sold earlier this year.
In addition, a group of Italian financial institutions have also said they will sell their stake in Telecom Italia, which amounts to a combined 7.6 percent.
ARGENTINA EXIT?
The sale of Telecom Argentina to Mexican billionaire David Martinez's investment company Fintech, agreed last November, has stalled because of regulatory issues.
In a statement late on Friday, Telecom Italia said talks with Fintech to modify the deal will take into account the regulatory delays and envisage guarantees to Telecom Italia.
This comes after Telecom Italia said that Fintech had asked for more time to complete the agreement, amid newspaper reports the deadline for closing the deal would be extended by 2-1/2 years, with penalties attached if it does not go through.
Before Friday's statement, an August deadline to complete the sale had already been pushed back twice to prevent it from falling apart.
Contacted by Reuters, a source close to the Argentina regulator in charge of the deal said there had been a request to speed up the approval process.
Failure to complete the sale would leave the incumbent with less cash to invest in faster networks and 4G services, a major plank of Patuano's strategy.
(Additional reporting by Danilo Masoni, Stefano Rebaudo, Stephen Jewkes and Elisa Anzolin in Milan, Sophie Sassard in London, and Juliana Castilla in Buenos Aires; Writing by Silvia Aloisi; Editing by Keith Weir and Greg Mahlich)