Recasts with TIM share move, adds trader comment in paragraphs 6-8

By Gianluca Lo Nostro and Leo Marchandon

Aug 28 (Reuters) - French telecommunications group Iliad will consider domestic consolidation opportunities but will not pursue further talks with Telecom Italia (TIM) TLIT.MI, its CEO said on Thursday, sending TIM's shares down nearly 8%.

Unlisted Iliad is eyeing consolidation mainly in its home market, as a potential carve-up of rival SFR from its beleaguered parent Altice would reduce the number of mobile network operators in France to three from four.

Preliminary talks among operators regarding SFR were already confirmed by the CEO of rival Orange ORAN.PA in July.

Chief executive Thomas Reynaud told reporters there were "very preliminary discussions" in June with competitors, adding that if "one of our three competitors were for sale, it would obviously be our responsibility to look at the subject."

On Italy, Reynaud was more definitive: "There have been no discussions with Telecom Italia since early April, and they will not resume... consolidation prospects with Italia are now behind us and the central hypothesis is a four-operator market."

Iliad failed to clinch a deal with Telecom Italia after it had sought to buy Vodafone VOD.L Italian operations in 2024.

Shares of Milan-listed Telecom Italia were down 7.7% to 0.42 euros by 1010 GMT. The stock has gained nearly 70% this year, including today's fall.

After state-backed Poste Italiane PST.MI became TIM's single largest investor, investors had lowered their bets for a TIM-Iliad combination in Italy, said a Milan-based trader.

"Iliad's CEO's remarks today seem quite straightforward and they triggered a sell-off after TIM's stock rally this year".

Telecommunications providers in Italy have been pushing for consolidation to overcome intense price competition, aiming to reduce the mobile network operator landscape to three players from four.

Earlier on Thursday, Iliad reported a 3.8% rise in half-year revenues to 5.09 billion euros ($5.96 billion), driven by a stable performance in France and continued customer growth in Italy.

In France, Free brand subscribers stayed steady at 23.1 million. Poland gained 100,000 customers to 15.5 million, while Italy added 505,000 net additions to 12.5 million subscribers.

(Reporting by Gianluca Lo Nostro and Leo Marchandon, additional reporting by Elvira Pollina and Laura Contemori; Editing by Matt Scuffham)

((Leo.Marchandon@thomsonreuters.com;))