MILAN- Iliad is considering buying into Telecom Italia's (TIM) domestic service operations as part of the French phone group's push to strengthen its Italian business, two sources familiar with the matter said.

Iliad is weighing the investment as TIM works on a turnaround plan centred around a split of the debt-laden former phone monopoly's wholesale network from its services operations.

One of the sources said Iliad targeted in particular the domestic consumer service unit which TIM would create as part of its reorganisation process.

Such a unit would include TIM's fixed and mobile consumer businesses, which last year accounted for 73% of its 9.9 billion euro ($10.72 billion) domestic service revenue.

TIM and Iliad declined to comment.

Founded by French billionaire Xavier Niel, Iliad launched low cost mobile services in Italy in 2018, intensifying already ferocious price competition in the country's crowded telecoms market.

Top executives at Iliad have repeatedly said in recent weeks that the French group would be interested in buying an Italian peer if anything came up for sale.

A third source close to the matter said TIM had not received any proposal from Iliad so far.

The French group has shifted its focus to TIM after a failed approach for Vodafone's Italian operations in February.

At the time Iliad teamed with Apax Partners to submit an 11.25 billion euro non-binding bid which the British operator swiftly rejected.

Apax, which is looking at a potential investment into TIM's services business, is not working with Iliad at present, a fourth source familiar with the situation said, dismissing reports in some Italian newspapers of the pair teaming up again.

Shares in TIM, which last week effectively blocked a takeover approach by KKR by denying the U.S. investment fund access to its books, were up 2.5% at 0.315 euro at 1230 GMT.

KKR is already an investor in TIM's fixed-line network and could still be involved in the network's spin-off, while the services business has already attracted interest from rival investment fund CVC.

($1 = 0.9237 euros)

(Reporting Elvira Pollina in Milan and Mathieu Rosemain in Paris, editing by Valentina Za, Kirsten Donovan)