AT&T, Sawiris circle Telecom Italia: source

By Paola Arosio

MILAN (Reuters) - Egyptian tycoon Naguib Sawiris and U.S. telecoms giant AT&T have contacted the core investors who want to sell their shares in Telecom Italia, a source close to the situation said.

The same source earlier said Mexico's America Movil had been interested, though the Mexican telecoms giant owned by tycoon Carlos Slim denied it had had any contact.

There had been no formal expression of interest in buying the stakes, said the source, who is familiar with the thinking of Telecom Italia shareholders.

Investors' expectations of a shake-up in the telecoms sector were ratcheted up this week when Verizon Communications agreed to buy British operator Vodafone out of its U.S. wireless business for $130 billion, and Telecom Italia is seen as an early target.

The board of Telecom Italia is meeting on September 19, and its Chairman Franco Bernabe is seeking a new investor ahead of the meeting.

AT&T declined to comment. Sawiris was not immediately available for comment.

"I can categorically deny that," America Movil Chief Financial Officer Carlos Garcia Moreno told Reuters in a telephone interview. "We have not had any contact."

Bernabe, who has been at the helm of the debt-laden Italian telco since 2008, was giving nothing away.

"Whatever is decided, if there is anything to be decided, will be discussed at the appropriate time and namely at the board meeting of September 19 of Telecom Italia and the following ones. So there will be lots of time to discuss," he told reporters at the sidelines of a telecoms conference in Brussels.

Shareholders have so far shot down two merger plans that Bernabe brought to the board. The first was a proposal last year of Sawiris taking a stake through a 3-billion-euro capital hike, while the second involved a merger with Hutchison Whampoa's Italian mobile unit.

But the Verizon deal is putting Telecom Italia, vulnerable due to its low profitability and net debt of more than 28 billion euros, back in the frame.

Marco Fossati, who owns 5 percent of Telecom Italia, told Reuters on Thursday that time was ripe for Telecom Italia to merge with another sector player, and he believed that the current Italian government would not block a merger with a foreign partner.

Shares of Telecom Italia soared as much as 9.6 percent on Thursday. It halved its gains after the denial from America Movil before closing 8.39 percent firmer at 0.607 euros, giving the company a market capitalization of more than 10 billion euros.

Telecom Italia is 22.4 percent-owned by Telco, which is in turn controlled by Italian banks Mediobanca and Intesa Sanpaolo, domestic insurer Generali and Spanish telecoms operator Telefonica.

Mediobanca has openly said it is preparing for a sale after writing down its indirect investment in Italy's biggest telecoms group to around current market price.

Shareholders have until September 28 to exercise the option to leave the Telco pact early.

"The acceleration in the sector's consolidation and Telecom Italia's and its holding company's difficulties support the idea of extraordinary operations," ICBPI brokerage said in a note, adding that the likely exit of Mediobanca and Generali from the Telco pact by September 28 was boosting speculation on the stock.

Italian daily la Repubblica said on Thursday Bernabe planned to propose to the board a reserved capital increase to bring in a new investor.

(Additional reporting by Stefano Rebaudo, Danilo Masoni, Valentina Za, Simon Gardner and Foo Yun Chee, Writing by Lisa Jucca; Editing by Anna Willard, Will Waterman, Simon Gardner and Bernard Orr)