By Clare Kane, Sophie Sassard and Anjuli Davies
MADRID/LONDON, Oct 14 (Reuters) - Spanish telecoms groupTelefonica has started preparing the sale of its $3.6billion stake in its listed Czech unit, three sector bankersclosely following the process but not directly involved said onMonday.
Telefonica, which aims to cut its debt to under 47 billioneuros ($64 billion) by the end of the year, has sold a number ofassets to pay down borrowings, including its Irish business O2.
Analysts have long tipped Telefonica Czech Republic as an asset the group might shed. Telefonica reportednet debt of 49.8 billion euros in mid-year results.
Two of the sources said Czech investment group PPF, owned bythe country's richest man Petr Kellner, was the most likelybuyer.
PPF recently sold its telecoms arm, which will compete asRevolution Mobile under new ownership, but seems keen to getback into the sector. It considered joining a 4G spectrumauction now underway in the Czech Republic as a new entrant butdid not, and so buying Telefonica's business would be analternative way into the market.
One of the two sources said a private equity fund could snapup Telefonica Czech Republic if PPF does not, adding that whilehe thought Russian telecoms groups would be interested in theasset, they could face political opposition.
A spokesman for Telefonica in Madrid declined to comment.
Bloomberg reported earlier on Monday that Goldman Sachs andSociete Generale were helping Telefonica find a buyer for thestake, though sources consulted by Reuters were unable toconfirm which banks had been mandated.
Societe Generale and Goldman Sachs declined to comment.
Telefonica currently holds 69.41 percent of the Czechcompany, which has a market value of $5.2 billion, according toThomson Reuters data. Telefonica Czech Republic's share pricerose 6.4 percent to 322.50 Czech crowns on Monday.
The company faces long-term pressure on margins due togrowing competition in the Czech telecoms market, where it facesrivals T-Mobile and Vodafone as well asso-called virtual operators that rent network space.
The former fixed-line monopoly is fighting back by trying togrow its data business over its fixed-line portfolio and byexpanding its smaller business in Slovakia.
The business has a total client base of 9.3 million in theCzech Republic and Slovakia and reported a 7 percent decline inhalf-year revenues to 930 million euros.