UPDATE 1-Italy's competition watchdog starts probe into TIM deal with DAZN on Serie A

(Adds TIM/DAZN comment, shares)

MILAN, July 8 (Reuters) - Italy's antitrust regulator said on Thursday it had opened an inquiry into a deal between sports streaming app DAZN and Telecom Italia (TIM) on Serie A matches to assess whether it would damage competition.

Telecom Italia sealed a technical and distribution agreement with DAZN, which secured the rights to screen the matches of Italy's top flight soccer league over the next three seasons for 2.5 billion euros ($2.95 billion).

"The agreement between TIM and DAZN could lead to significant distortions of competition," the authority said in a statement.

It added the deal could limit competitive development in the pay-TV market and related busineses, including fixed retail, wholesale broadband services and mobile telecommunications.

The watchdog proposed measures to alleviate some of the competition concerns, including the suspension of clauses to limit DAZN's ability to distribute its services on other platforms.

TIM shares fell 2% by 0726 GMT compared with a 1.4% fall in Italy's blue chip index.

Under the streaming deal, the former state phone monopoly, which is relying on soccer to promote its ultra-fast broadband and pay-TV services, will cover more than 40% of the annual payments DAZN has to make to Serie A, a document seen by Reuters showed.

Pay-TV operator SKY Italia, owned by Comcast, and other TIM rivals had challenged the agreement on antitrust grounds, saying the deal could strengthen TIM's already dominant position in the broadband market.

DAZN said it had not immediate comment, while TIM was not immediately available to comment.

($1 = 0.8480 euros) (Reporting by Elvira Pollina, editing by Agnieszka Flak and Barbara Lewis)

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