* Telecom proposed full ownership of Metroweb in 5 years
* Rejection could favour Vodafone in talks for stake
* Battle comes as Italian govt pushes for digital plan (Adds details, context)
By Danilo Masoni and Alberto Sisto
MILAN/ROME, April 23 (Reuters) - The state owner of Italy'sMetroweb has rejected a proposal by Telecom Italia totake a stake in the broadband company and gradually reach fullownership, according to two people close to the matter and anemail seen by Reuters.
The latest twist in long-running talks between TelecomItalia and state lender Cassa Depositi e Presititi (CDP) couldfavour Vodafone, which has also set its sight on thebroadband firm.
The battle for Metroweb, controlled by infrastructure fundF2i and CDP through its investment arm Fondo Strategico Italiano(FSI), is politically sensitive because Prime Minister MatteoRenzi considers it a building block for a 12 billion euro ($13billion) plan to roll out faster networks.
"CDP and FSI are not in the condition to go ahead ... atterms outlined in the MOU (memorandum of understanding) draftsent by Telecom Italia," FSI head Maurizio Tamagnini toldTelecom Italia CEO Marco Patuano in an April 21 email seen byReuters and leaked to Italian newspapers.
It was not clear whether the rejection puts an end tonegotiations between Telecom Italia and CDP.
Under its proposal, Telecom Italia would initially take a 40percent voting stake in Metroweb and bring it to 100 percentover five years as it carries out investments to bring fibrecables close to the homes in 250 cities, one source said.
Talks with Telecom Italia over Metroweb had already hit astumbling block earlier this year due to disagreements over theownership structure of a deal, and the phone company's chairman,Giuseppe Recchi, said in February the board had concluded thatconditions were not yet right for an agreement.
Metroweb is 53.8 percent owned by F2i and 46.2 percent byCDP unit FSI. CDP also owns a stake in F2i.
Rivals Telecom Italia and Vodafone have set their sights onthe company as they seek to meet growing consumer demand forbandwidth-consuming services.
CDP has said that Telecom Italia could buy a majority stakein Metroweb but it would rather have other phone operators, suchas Vodafone, also as shareholders.
The presence of other operators is something Telecom Italiais not willing to accept. (Additional reporting by Luca Trogni; Editing by Pravin Char)
Vodafone (VOD)