The move could be significant because it could pave the way to an Italian treasury-sponsored plan to create a single network champion in the country.

TIM previously postponed a decision over selling 37.5% of its secondary grid to KKR after the government requested time to negotiate a merger of its network assets with smaller rival Open Fiber to create a single fast broadband network.

Telecom Italia's board meeting is expected to approve the deal on Aug. 31.

Shares in Telecom Italia were up 3% in early Milan trade.

The Economy Ministry press office did not immediately replied to a request for comment. Telecom Italia said it had no comment on the report.

The Italian government is trying to negotiate a deal between TIM and Open Fiber, jointly owned by state lender CDP and utility Enel, to merge assets and create a single national champion. But TIM is reluctant to accept less than 50% of any network.

Earlier this month a treasury source told Reuters that Italy's economy ministry wants a single ultra-fast broadband network that is independent of former phone monopoly Telecom Italia , granting equal access to all market players.

The state would keep a strong role in the new company, the source added.

Under the Treasury-sponsored plan, the single ultra-fast broadband network operator could initially be majority-owned by TIM if the value of the assets folded in the new player justified it, a person close to the matter told Reuters.

In a joint statement released on Wednesday, trade unions of the phone group backed the Treasury-sponsored plan. They also called for CDP to increase its holding in TIM.

(Reporting by Giselda Vagnoni; Editing by Jacqueline Wong and David Holmes)