Enel aims to spend 2.5 bln euros on fibre broadband network

* Enel (LSE: 0NRE.L - news) broadband network to cover 224 cities

* Enel will be wholesale operator only

* Project equity will be open to infrastructure funds (Recasts lead, adds Enel CEO comments)

By Stephen Jewkes

MILAN, March 23 (Reuters) - Italian power utility Enel (Swiss: ENEL.SW - news) is proposing to spend around 2.5 billion euros ($2.8 billion) on equipping the country's homes with fibre optic cables in a move that could put pressure on Telecom Italia (Other OTC: TIAJF - news) to get going with its own plans for building a nationwide fibre broadband network.

The state-controlled utility said on Wednesday it intends to run fibre to the home alongside its power network in over 224 municipalities and wholesale the capacity to the telecoms service providers - "any retail operator that wants to give its customers access".

Enel is still in talks about forming a commercial partnership with mobile network operators Vodafone and VimpelCom (NasdaqGS: VIP - news) 's Wind but Starace said they would not become shareholders in Enel Open Fiber (EOF), the vehicle set up to execute the project.

"EOF equity remains open to investors, but mainly infrastructure funds," he said.

Enel's plans, first flagged early last year, have caused some friction with Telecom Italia, the former monopoly network operator, which is still putting together its own scheme to connect the whole country up to ultrafast broadband.

The heavily indebted incumbent, whose top shareholder is now French media giant Vivendi (LSE: 0IIF.L - news) , has pledged to spend 12 billion euros in Italy under its latest three-year business plan, including 3.6 billion euros on laying fibre optic cables.

But using Enel's high-speed network could give Telecom Italia rivals a competitive edge in the race to offer faster internet connections, analysts said.

"It (Other OTC: ITGL - news) 's the cheapest solution to get (fibre) to homes and factories," Enel Chief Executive Francesco Starace told analysts in a conference call on the group's full-year results.

Enel will begin work later this year on installing a new generation of smart electricity meters in 33 million Italian homes and intends to run fibre through its pipes at the same time.

EOF will develop the fibre network in stages, with around 7.5 million homes expected to be covered in the first few years.

The project to develop a truly nationwide fibre broadband network is a top priority for Prime Minister Matteo Renzi who is keen to get Italy's Internet connections up to speed with the rest of Europe and close 'the digital divide' to give a boost to a sluggish economy.

Starace, who has put networks and grids at the core of Enel's business strategy, said anyone trying to build a fibre network running all the way into consumers' homes and offices without taking advantage of Enel's pipes would likely spend more than 3 billion euros on doing the same job.

Earlier this year he had said using Enel's infrastructure could reduce costs by 30-40 percent.

($1 = 0.8935 euros) (Editing by Greg Mahlich)