FILE PHOTO: Telecom Italia logo is seen at the headquarter in Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini/File Photo/File Photo

ROME (Reuters) - A single network entity controlled by Italy's former monopoly phone group Telecom Italia (TIM) TLIT.MI would be a "backward step", the country's communication watchdog chief Angelo Cardani said on Friday.

Last month TIM signed a non-disclosure agreement with state lender CDP and utility Enel ENEI.MI to kick off talks on ways of integrating its fiber optic network with that of smaller rival Open Fiber, including a possible merger.

TIM’s Chief Executive Luigi Gubitosi said earlier this year merging Open Fiber with TIM’s networks would be positive for both companies, adding TIM would maintain some kind of control of the new network entity.

“Should the incumbent (TIM) control the new entity it would not just be a big U-turn but also a backward step,” Cardani told reporters when asked about the possible merger of TIM’s and Open Fiber’s networks.

In a subsequent statement, Cardani said he was not talking about a specific case but that, generally speaking, any deal creating a monopoly reduces the benefits of competition.

Cardani’s seven-year mandate at the helm of communication watchdog AGCOM, which alongside the antitrust authority would have to give the green light to any deal between TIM and Open Fiber, expires next week.