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UPDATE 2-Italy close to blueprint deal on single broadband network - sources

* Govt wants network plan finalised ahead of TIM board Monday

* Plan envisages strict governance controls on TIM

* CDP to have vetting powers on strategic issues

* CDP discussing option with TIM, KKR to buy into Fibercop

* (Recasts with sources, adds details)

By Giuseppe Fonte, Elvira Pollina and Stephen Jewkes

ROME, Aug 27 (Reuters) - Italy’s government is close to finalising a single broadband network proposal that could be discussed by the board of Telecom Italia (TIM) next week as part of a bid to resolve months of wrangling over control of the future network, sources said on Thursday.

Rome is pushing to create a single high speed broadband network open equally to all operators to close Italy’s digital divide with the rest of Europe, and wants TIM to merge its fibre and copper assets with smaller rival Open Fiber.

TIM and Open Fiber have been talking about how to combine their assets for more than a year but governance issues have halted progress, with TIM insisting on control of a future network and Open Fiber supporting a wholesale-only business not controlled by the former phone monopoly.

The latest proposal would allow TIM to initially keep a majority stake in the future network but envisages restrictions on its control with a view to securing regulatory approval, the sources said.

TIM would not be allowed to have a majority of board seats on the single network company, they added.

Rome wants a road map in place by Monday, when TIM’s board meets to sign off on a deal to sell a 37.5% stake in its “last-mile” network, FiberCop, to U.S. fund KKR.

“The parties are working hard to come up with a framework deal on the single network ahead of the TIM board,” one of the sources said.

TIM, KKR and state lender Cassa Depositi e Prestiti (CDP) declined to comment. CDP is TIM’s second-biggest shareholder and controls Open Fiber alongside state-controlled utility Enel .

The government-sponsored plan envisages merging FiberCop and Open Fiber. TIM would then fold its primary network, connecting switching centres to cabinets, into FiberCop, giving the new player the entire fixed-access network.

The tightly regulated national champion could then be eligible for grants from Europe’s coronavirus recovery fund.

The blueprint, which is still under discussion, would give CDP vetting powers over strategic issues at any single network company, two of the sources said.

TIM, whose main shareholder is France’s Vivendi, could have the right to nominate the CEO of the network company but with the blessing of CDP, according to one of the proposals still under discussion and which may be subject to change.

According to three sources, TIM and KKR would grant CDP an option to enter FiberCop directly with a share that, according to one of the sources, could be up to 19%.

Talks between TIM and CDP are continuing, the sources said. (Reporting by Giuseppe Fonte, Elvira Pollina and Stephen Jewkes; editing by James Mackenzie and Giles Elgood and Kirsten Donovan)

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