* KKR indicative offer A$3.50 per share vs A$2.86 previous close
* Vocus says considering the offer
* KKR has raised $9.3 bln in Asia buyout fund (Recasts throughout, adds shares, investor comment)
By Byron Kaye
June 7 (Reuters) - Private equity giant KKR & Co LP made a $1.66 billion takeover approach for Australia's embattled No. 4 internet company Vocus Group Ltd, the target said, sparking a bounce in its shares which have been hit by earnings downgrades.
The Sydney-listed owner of the iPrimus internet and mobile phone brand said KKR made an indicative cash offer of A$3.50 per share, a premium to its closing price the previous day but nearly two-thirds below its A$9.36 close a year earlier.
Vocus now must decide whether to accept the offer, wait for a rival approach or convince investors its own $2.4 billion takeover spree since 2014 will ultimately pay off.
"The sum of the parts of the business is probably worth more than the share price was indicating," said Danial Moradi, equity strategist at Lonsec Stockbroking.
"It is an opportunistic first bid that might drive out any other buyers. Most likely Vocus will come out and reject it."
Vocus shares rose as much as 22 percent on Wednesday to match KKR's proposed buyout price, before slipping slightly amid doubts the Australian company would accept the offer. The broader market was flat.
In a statement, Vocus said it would consider the proposal, which includes a condition that its board supports the offer unanimously, and urged shareholders not to take any action.
A KKR spokesman declined to comment.
While former national carrier Telstra dominates Australia's telecoms and internet market, smaller rivals like Vocus are jostling for exposure to a government-led A$40 billion ($30 billion) broadband network that is being rolled out around the country.
It aims to bring high-speed internet to all Australians by 2020, which means companies like Vocus can sell to more customers.
Though Vocus runs some retail brands, it has been expanding its physical assets, including the $650 million takeover of a firm building a 4,600-km (2,900-mile) undersea fibre cable between Singapore and the city of Perth.
"These are highly strategic assets that with the fullness of time and an improvement in execution will earn considerably more than what they do today," said David Pace, portfolio manager at Greencape Capital, which owns 8.2 percent of Vocus.
"The initial bid appears to capitalise (on) a perfect storm."
Last week, KKR said it had raised $9.3 billion for its most recent Asia-focused buyout fund as it looks for larger deals.
Vocus said it hired investment banks Credit Suisse and Goldman Sachs as financial advisers.
$1 = 1.3270 Australian dollars Reporting by Byron Kaye in Sydney and Christina Martin in Bengaluru; Editing by Stephen Coates