Rome has long pushed for an all-fibre optic network to help Italian business and boost productivity. Open Fiber said its network would cover 271 Italian cities and around 7,000 municipalities in the country.

Open Fiber said it had signed the 7-year 3.5 billion euro project finance deal with BNP Paribas, Societe Generale and UniCredit and expects it to be finalised in the next few months.

The firm, which is jointly owned by state-controlled utility Enel and state lender Cassa Depositi e Prestiti, said in its new 2018-2027 plan it was looking to take its fibre-optic network into about 19 million homes and businesses.

It added it would spend about one billion euros per year over the next three years.

Enel, which will use its existing power grid network to house cable, has said it intends to repeat the project in other countries where it operates.

Open Fiber's new plan comes just days after investor CDP bought a stake in phone incumbent Telecom Italia (TIM) in a move some say could open the way for an eventual merger of Open Fiber with the network of its bigger rival.

The government enlisted the help of Enel two years ago to build a fibre-to-the-home (FTTH) network after accusing TIM of acting too slowly to upgrade its ageing copper network.

But with TIM expanding its own network, industry experts say duplication of infrastructure makes little economic sense.

"With the approval of the new plan and the funding a new phase starts for Open Fiber with the aim of speeding up the roll-out of the FTTH network," its CEO Elisabetta Ripa said.

The company said it had extended an existing deal with Vodafone to cover all 271 cities covered by its plan.

Sky Italian unit last month signed a long-term deal with Open Fiber to allow it to offer internet TV in Italy.

($1 = 0.8114 euros)

(Reporting by Stephen Jewkes; editing by Francesca Landini and Alexander Smith)

By Stephen Jewkes