* Initial deal was $960 mln sale of Argentine unit to Fintech
* Telecom Italia expects regulator approval within 2.5 years
* Phone group to sell 17 pct stake for $216 mln by end Oct
* Remainder of 51 pct once regulators give green light (Adds details, background)
MILAN, Oct 25 (Reuters) - Telecom Italia said on Saturday it would sell only part of its majority stake in Telecom Argentina and the rest once the regulator approved its full sale to New York-based fund Fintech, owned by Mexican billionaire David Martinez.
The Italian phone group had agreed to sell its controlling stake in Telecom Argentina holding company Sofora to Fintech for $960 million almost one year ago, but the Argentina telecoms regulator SECOM has been slow to approve the deal.
In a statement to the Milan stock exchange, Telecom Italia said it expected SECOM's approval within two and a half years, and that in the meantime it would sell an initial 17 percent in Sofora to Fintech by end-October for $216 million.
The phone company plans to then sell its remaining 51 percent controlling stake in Sofora to Fintech once regulators give the green light, cashing in on the remaining $960 million.
Telecom Italia holds 68 percent in Sofora, which in turn has a 51 percent stake in Nortel Inversora, the investment vehicle holding 55 percent in Telecom Argentina.
The sale of Telecom Argentina was part of a 4 billion euro ($5 billion) plan created last year by CEO Marco Patuano to help cut debt and fund much-needed investment to keep up with competitors in its two key Italian and Brazilian markets.
One issue seen as preventing regulatory clearance was Fintech's 40 percent stake in Cablevision, Argentina's biggest cable television company, as local regulations limit cross holdings between telecoms and media firms.
If the deal is not closed in two and a half years, Telecom Italia could either terminate the deal or seek another buyer under a guarantee scheme with Fintech that ensures it is paid at least the same amount.
Failure to complete the sale would leave Telecom Italia with less cash to invest in faster networks and 4G services, a major plank of Patuano's strategy. (1 US dollar = 0.7893 euro) (Reporting by Danilo Masoni; Editing by Raissa Kasolowsky)