UPDATE 1-Private equity buys controlling stake in Euskaltel

* Sees growth in niche regional market

* Basque bank maintains control

(Adds detail)

LONDON/MADRID, Oct 8 (Reuters) - Private equity groupsInvestindustrial and Trilantic Capital Partners have boughtalmost half of Spanish cable operator Euskaltel, the marketleader in highspeed broadband in the industrialised Basqueregion.

Investindustrial, a buyouts group backed by Italy's Bonomifamily, and former Lehman Brothers private equity arm Trilantic,said on Monday they had bought a 48 percent stake in Euskaltel,which has 45 percent of the broadband market in its region.

The purchase price was not disclosed, but exceeds 200million euros ($261 million), the buyers said.

Investindustrial said Euskaltel, which offers fixed andmobile telephony, internet and television through cable, hassignificant room to improve its profitability. Euskaltel postedearnings before interest, tax depreciation and amortisation of131 million euros last year on sales of 334 million.

Operators such as Euskaltel and fellow telecom group R, inthe northern region of Galicia, have built niche markets byrolling out cable networks to local businesses and households.

Nationally, only Spanish firm ONO and listed operatorTelefonica offer optical fibre networks.

Kutxabank, a Basque region savings bank, sold a 10 percentstake in the deal, keeping 49.9 percent of Euskaltel.

It said the entry of new shareholders was driven byaccounting and regulatory issues after its merger with two otherlenders - BBK and Vital - left it with 68 percent of Euskaltel.

Spanish media reported Euskaltel has been seeking freshcapital after being ordered to pay 222 million euros to Orange

in a legal dispute.

In the deal, a number of Basque government-related groupssold a 19 percent stake, Spanish utility Iberdrola sold8 percent, retaining 2 percent, Endesa sold 9 percent and solarpanel maker Mondragon sold 2 percent.

($1 = 0.7657 euro)

(Reporting by Simon Meads in London, and Sarah Morris andRobert Hetz in Madrid; Editing by Dan Lalor)

(simon.meads@thomsonreuters.com; +44 20 7542 9969; ReutersMessaging: simon.meads.thomsonreuters.com@reuters.net)