Exclusive: Telecom Italia working on new investment plan for Brazil - source

MILAN (Reuters) - Telecom Italia's majority-owned Brazilian mobile firm is considering investing an extra 750 million euros ($948.31 million) over three years to improve its network, said a person with knowledge of the plan, as the company tries to regain momentum in a key overseas market.

The plan, called Turbo, could be approved by TIM Participacoes's board by the end of October, the person said.

Telecom Italia lost out to Spain's Telefonica last month in a $9 billion battle to buy the Brazilian broadband telecoms and pay TV firm GVT from French group Vivendi , leaving TIM Brasil in a weaker position than its rivals seeking to offer bundled fixed line and wireless telecoms services.

The big issue at Telecom Italia is now how Chief Executive Marco Patuano will reshape the group's strategy to compete in a saturated European market and adjust to consolidation that is creating bigger global rivals.

In Brazil, Telecom Italia faces yet more challenges. For years the country has largely avoided the consolidation sweeping Europe because of its robust economy.

But after mobile phone subscriptions in Brazil more than trebled in the eight years to 2012, growth in the continent's biggest economy has slowed and with competition heating up so has speculation of mergers among the country's four mobile network operators -- Telefonica's Vivo-branded subsidiary Telefonica Brasil , TIM Brasil, America Movil and Grupo Oi .

To strengthen its position in the market as well as in any merger opportunity, TIM Brasil is now considering a plan to boost its investments over the next three years to strengthen its 4G and 3G data network infrastructure, the person said.

Telecom Italia declined to comment.

In its latest 2014-2016 plan TIM Participacoes, which is 67 percent owned by Telecom Italia, aimed for capital spending of 11 billion reais ($4.55 billion), some 80 percent of which is earmarked for network upgrades. The extra investment would amount to a 25 percent increase in that network spend.

TIM Brasil, the country's second-biggest mobile network operator after Telefonica, bought more 4G radio spectrum in September, is focusing its investments in the southern states of Parana and Santa Catarina, the Northeast and Sao Paulo, the person said.

Meanwhile TIM Brasil has hired Banco Bradesco's investment banking unit to look at a potential bid for Oi, a source said last week.

Any such bid would turn the tables on Oi, which hired Grupo BTG Pactual SA last month to advise on a possible bid for Telecom Italia's 67 percent stake in TIM Brasil.

(Editing by Greg Mahlich)