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Telefonica says exploring Czech stake sale

A man speaks by a mobile next to Telefonica's tower in Barcelona January 30, 2013. REUTERS/Albert Gea

MADRID (Reuters) - Spanish telecoms company Telefonica is exploring options for its Czech business, which could include a sale, and is in talks with Czech investment group PPF, it said on Tuesday.

Reuters cited banking sources on Monday as saying Telefonica was set to sell its $3.6 billion (2.25 billion pounds) stake in Telefonica Czech Republic, with PPF the most likely buyer. Shares in the Czech company hit a nine-month high on Tuesday morning.

Telefonica shares were steady at 12.5 euros.

"Telefonica is exploring strategic options in relation to its stake in Telefonica Czech Republic, including conversations with investor group PPF, with nothing certain regarding whether an agreement will be reached, or final terms and conditions," Telefonica said in a stock market announcement.

A PPF spokesman declined to comment. The company, owned by the Czech Republic's richest man Petr Kellner, recently sold its telecoms arm but considered joining a 4G spectrum auction underway in the Czech Republic and could use the purchase of Telefonica's business as an alternative route into the market.

Telefonica, which amassed debt during a decade-long expansion into Latin America, aims to reduce debt to under 47 billion euros ($64 billion) by year-end and has already sold a number of assets this year, including its Irish unit O2.

Analysts said the sale could free up capital for other deals at the telecoms company, as well as helping to cut debt.

"It could make sense for the company to divest this asset as it would provide Telefonica with more flexibility to consider other merger and acquisition opportunities, namely in Brazil where the company could benefit from the possibility of a sale of TIM Brasil by Telecom Italia," broker Espirito Santo said in a note to clients.

The Madrid-based company reported net debt of 49.8 billion euros in mid-year results.

(Reporting by Clare Kane; Editing by Sonya Dowsett; Additional reporting by Jason Hovet in Prague; Editing by Sonya Dowsett and Mark Potter)