Europe shares rebound, led by French telecoms

* FTSEurofirst 300 up 0.2 pct, bounces after last week's slide

* Bouygues (Other OTC: BOUYF - news) -Iliad (Paris: FR0004035913 - news) deal sparks rally in French telecom shares

* Mining (LSE: MIR.L - news) shares hurt again by soft Chinese data

* CAC 40 to outperform DAX -Societe Generale (Paris: FR0000130809 - news) 's Kaloyan

By Blaise Robinson

PARIS, March 10 (Reuters) - European shares rebounded on Monday after last week's sharp losses, led by a strong rally in French telecom shares following a deal between Bouygues (Frankfurt: BYG.F - news) and Iliad.

But gains were capped by a fresh drop in mining shares following soft Chinese economic data.

At 1030 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,330.02 points. It had tumbled 1.5 percent last week as tensions rose in Ukraine.

"People sold on Friday on fear of an escalation in Crimea, but things seem to have stabilised now so it's tempting to buy the dip, using a call spread for instance, to limit the risks," said David Thebault, head of quantitative sales trading at Global Equities in Paris.

Russian forces tightened their grip on the Crimean peninsula by seizing another border post and a military airfield over the weekend, and tensions there remain high.

German leader Angela Merkel said on Sunday that a planned referendum backed by Moscow on whether Crimea should join Russia was illegal and violated Ukraine's constitution.

French telecom shares rallied sharply after Bouygues's telecom unit agreed to sell its mobile network and much of its spectrum to Iliad as a way to head off competition regulators' concerns about its pending bid for Vivendi (TLO: VIV.TI - news) 's SFR unit.

Iliad was up 12.6 percent on Monday, while Bouygues was 10 percent higher and Orange (Other OTC: FNCTF - news) was up 3.3 percent.

Robin Bienenstock, analyst at Bernstein Research, said that a combination of SFR and Bouygues would lift the entire sector, leaving out only cable operator Numericable, which had also bid for SFR and whose shares fell 13.7 percent on Monday.

"We think that this is the best deal for Vivendi, Bouygues, Iliad and Orange, easing price pressure in both wireless and wireline," Bienenstock wrote in a note.

France's benchmark CAC 40 equity index was up 0.8 percent, outperforming Germany's DAX, while fell 0.2 percent - a trend that should continue going forward, Societe Generale European equity strategist Roland Kaloyan said.

"'Being cautious' and 'being worried' about France seems to be the general consensus when meeting European investors today," Kaloyan wrote in a note.

"France is implementing the radical policy shift outlined in President Hollande's announcement mid-January. Expect a clear change in economic direction in the coming years, towards a supply side policy. Any positive news will be a strong tailwind for French assets."

Investors were also cautious on German stocks on Monday, due to their higher exposure to emerging markets, said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"Germany is hurt a bit more than the others as it is an exporter nation with vast interests in both Central Europe and China," he said.

"However, in the larger scheme of things this is probably a healthy correction. We see this as a little pause and not the end of the bull market and remain buyers of the dip."

Mining shares slid again, hurt by Chinese data showing a surprisingly sharp drop in exports which tipped the country's trade balance into a deficit.

The STOXX Europe 600 basic resources index was down 1.1 percent following its 3.5 percent slump on Friday.

Rio Tinto (Xetra: 855018 - news) was down 0.7 percent and BHP Billiton (NYSE: BBL - news) down 0.9 percent. The STOXX basic resources index has tumbled 9 percent since mid-February, hit by fears about economic growth in China, the world's biggest metal consumer.

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