* Niel says perception of Telecom Italia as target wrong
* Telecom Italia CEO says Niel has "strong and clear" vision
* Telecom Italia most heavily traded stock in Europe by volume (Adds details, analysts, comment from Telecom Italia CEO, shares)
By Agnieszka Flak
MILAN, Dec 18 (Reuters) - French businessman Xavier Niel sees Telecom Italia as a predator rather than a prey in Europe's consolidating telecoms market and has ideas on how to strengthen the group after emerging as potentially its second biggest investor, he told a newspaper.
Telecom Italia has been at the centre of feverish speculation since Niel disclosed in October that he had bought options that could hand him a 15.1 percent holding in the firm, behind French media group Vivendi's 20.5 percent stake.
In his first detailed comments since then, Niel told Italian daily La Stampa he was an industrial investor in the group and not a financial "raider".
However, he declined to comment on whether he plans to convert his options into shares.
Niel said heavily-indebted Telecom Italia, which has been struggling for years with a lack of clear strategy and is regarded as a potential takeover target, had "all it takes" to become an aggregator in the European telecoms market.
"It seems to me there is a widespread opinion that it should be a target ... but I really don't think that," said Niel, founder of low-cost mobile operator Iliad.
The fact that Telecom Italia has operations in Italy and Brazil but nowhere else in Europe was an opportunity, he added.
Analysts were puzzled by Niel's comments and said Telecom Italia, with gross debt of 38 billion euros ($41 billion), would struggle to bid for one of its bigger rivals, which include Germany's Deutsche Telecom, Spain's Telefonica , France's Orange and UK's Vodafone.
"It would rather seem that Niel is currying favour in political circles that historically have been against Telecom Italia falling into foreign hands," said Andrea Giuricin, an analyst at Milan's Bicocca university.
While Telecom Italia could boost its position in Italy by buying small fibre network firm Metroweb, an option hinted at by that company's shareholders this week, analysts said such a deal would be small and do little to boost its ranking in Europe.
Niel's comments came three days after Vivendi tightened its grip on the Italian firm by securing four seats on its board and blocking a share conversion that would have diluted its stake.
Niel said he was not acting on behalf of any other player and that he did not know whether Orange, often tipped as a possible suitor for Telecom Italia, was interested.
He said Telecom Italia was a "fantastic operator" with a reasonably good management, but also had some weaknesses.
"And I have some ideas," he told the paper. "You need to give (Telecom Italia) the capacity to invest to grow both in fibre optic and 4G mobile networks so that it can generate higher revenues but still keep tariffs low."
Echoing comments made by Vivendi earlier this week, Niel said Telecom Italia needed to become an important player in the development of Italy's ultrafast broadband network - a pet project of Prime Minister Matteo Renzi.
Telecom Italia Chief Executive Marco Patuano backed Niel on Friday, saying he had a "strong and clear" vision for the group.
Speculation around Niel's moves sparked interest in Telecom Italia shares on Friday, making the stock the most heavily traded in Europe by volume. It was down 1.1 percent by 1325 GMT.
$1 = 0.9246 euros Additional reporting by Alberto Sisto in Rome; Editing by Mark Potter and David Evans