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Sawiris ups Telecom Italia short position after Telefonica wins control

By Danilo Masoni and Sophie Sassard

MILAN/LONDON (Reuters) - Egyptian tycoon Naguib Sawiris has increased his short position in Telecom Italia shares after Telefonica struck a deal to gradually take control of the debt-laden Italian operator.

Sawiris, who unsuccessfully attempted to buy a 3 billion euro stake in Telecom Italia last year, has built up a short position of 1.2 percent through his Orascom TMT investments holding company, data from market regulator Consob showed on Monday.

On Friday the short position was 1 percent.

Last week Telefonica struck a deal with its Italian partners to gradually secure full sway over Telco, the holding company that controls Telecom Italia via a 22.4 percent stake.

The deal led to the resignation of long standing executive chairman Franco Bernabe who had been seeking support for a capital increase of up to 5 billion euros to avoid a downgrade to junk and help fund badly needed investments in Italy. The company is burdened by nearly 29 billion euros of net debt.

Telefonica instead is seen as favoring asset sales, such as Telecom Italia's prized unit in Brazil TIM Participacoes.

Sawiris did not respond immediately to requests for comment on his move.

A source familiar with his thinking said the tycoon was shorting Telecom Italia shares on expectations there will be a credit downgrade soon, and that chances of Telefonica managing to sell TIM in time to avoid a capital raising were slender.

On Monday Standard and Poor's placed the ratings of Telecom Italia on creditwatch negative for a possible downgrade to junk status.

Last Friday trade union officials said Telecom Italia's new chief executive Marco Patuano will unveil a business plan outlining the future of its South American units and a possible corporate restructuring in Italy at a board meeting on November 7.

(Reporting by Sophie Sassard, Danilo Masoni, Leila Aboud; editing by David Evans)

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