April 2 (Bloomberg) -- Telefonica SA and Vodafone Group Plc are preparing bids for Telecom Italia SpA’s German broadband Internet business Hansenet, according to three people familiar with the process.

Telefonica and Vodafone are working on preliminary, non- binding offers for Hansenet and have been asked to submit bids by April 20, according to the people, who declined to be named as the talks are confidential. United Internet AG, Germany’s third-largest Web-access provider, and unidentified private- equity companies are also considering bids, the people said.

Telecom Italia Chief Executive Officer Franco Bernabe is selling assets to lower debt. Hansenet may be valued at about 1.1 billion euros ($1.46 billion), said Frank Rothauge, an analyst at Sal. Oppenheim jr. & Cie. Hansenet, which had sales of 1.2 billion euros last year, would give the buyer about 2.3 million broadband customers in Europe’s biggest economy, where Deutsche Telekom AG is the dominant player.

“I expect Telefonica and Vodafone to be the main contenders as a deal would make a lot of sense for both,” Rothauge said by phone from Frankfurt. “Vodafone could attack Deutsche Telekom more effectively and also cut administrative costs, while Telefonica would bolster its comparatively small German broadband business and become a real market contender.”

Simon Gordon, a spokesman for Newbury, England-based Vodafone declined to comment, as did Marcus Schaps, a spokesman at Montabaur-based United Internet. An official at Telefonica who asked not to be named also declined to comment. The sale process “is under way,” said a Telecom Italia official.

Turkcell Drops Out

Turkcell Iletisim Hizmetleri AS, Turkey’s biggest mobile- phone company, said yesterday it won’t bid for Hamburg-based Hansenet. Turkcell previously considered an offer, possibly together with a financial investor, one of the people said.

Vodafone and Madrid-based Telefonica are both trying to increase sales from broadband and data offerings as growth for voice calls is slowing. Friedrich Joussen, Vodafone’s German head, said in March that the German broadband market needs to consolidate and that he’s looking at opportunities. He said he would only consider acquisitions if the price is right.

Vodafone said earlier this year that its German broadband unit Arcor AG aims to increase its share of the digital- subscriber line broadband market to 25 percent from 14 percent.

Vodafone had about 3 million fast-Internet customers in Germany at the end of 2008, while Telefonica’s O2 unit had 215,000 and Deutsche Telekom 10.6 million.

Telecom Italia plans to raise as much as 3 billion euros by selling assets. The company said last year that on top of Hansenet, it was also considering selling wholesale voice services provider Telecom Italia Sparkle and a stake in a Cuban mobile operator.

Telefonica, Mediobanca SpA, Assicurazioni Generali SpA, Intesa Sanpaolo SpA and the Benetton family control 24.5 percent of Telecom Italia through holding company Telco SpA.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.netSimon Thiel in London at sthiel1@bloomberg.net

Last Updated: April 1, 2009 19:01 EDT