Telecom Italia works with Rothschild to find broadband partner -sources

(Fixes typographical error in headline)

By Stephen Jewkes and Agnieszka Flak

MILAN, March 28 (Reuters) - Telecom Italia (Amsterdam: TI6.AS - news) is working with Rothschild to help it to find a partner to fund part of its broadband business in Italy, three sources close to the matter said on Tuesday.

The former Italian phone monopoly said last week that it would set up a special company to develop its ultrafast broadband network to include areas of the country that would not normally be economically viable.

The company intends to speed delivery of a fibre broadband network across Italian towns and cities but has said it will not participate in tenders launched by the state to attract investment in underdeveloped areas.

Those tenders are being reviewed by European Union antitrust regulators after Telecom Italia asked the watchdog to look into a possible breach of EU state aid rules.

Telecom Italia, 24 percent owned by French media giant Vivendi (LSE: 0IIF.L - news) , said last week that it is seeking a financial partner as majority shareholder in its new business in the coming months.

Rothschild has no official mandate from Telecom Italia, one of the sources said, but the adviser has begun to test the market. A second source said that initial approaches were made to potential investors last week.

Telecom Italia shares were little changed at 0.85 euros at 1230 GMT.

Daily newspaper Il Sole 24 Ore reported on Tuesday that Rothschild had identified about 20 interested parties and that a partner for Telecom Italia would be found by the summer.

Italian infrastructure fund F2i, which used to control Milan-based broadband company Metroweb, is one of the parties asked to look at the business, a third source said.

The development of a broadband network is a top priority for Italy's government, which is looking to upgrade the country's phone and Internet infrastructure to support business.

Rome has enlisted the help of state-controlled utility Enel (Swiss: ENEL.SW - news) to use its pipes and pylons to lay fibre-optic cables throughout the country.

Enel (LSE: 0NRE.L - news) has said it is open to investment funds and financial partners to help it to bankroll its Open Fiber unit, which is partly owned by state lender Cassa Depositi e Prestiti. (Editing by David Goodman)