UPDATE 1-Hutchison's Drei to buy Tele2 to rival Telekom Austria

* New group to offer landlines, mobiles, Internet

* Merged entity to have more lines than Telekom Austria

* Telekom Austria now alone offering combined services (Adds detail, market context, CEO comment)

VIENNA, July 28 (Reuters) - Mobile firm Hutchison Drei Austria said on Friday it would buy landline-focused Tele2 from its Swedish owner for 95 million euros ($111 million), creating a telecoms group to rival Telekom Austria .

Drei, also known as Three, said the merged group, led by Hong Kong-based Hutchison, would have 1,500 employees, around 1 billion euros in annual sales and four million mobile, landline and internet lines, or revenue generating units.

Telekom Austria, the firm owned by Mexican tycoon Carlos Slim which now has a monopoly on combined mobile, landline and internet services in Austria, had about 3.5 million revenue units last year. It increasingly focuses on business clients.

"By taking over Tele2 Austria we close the last gaps in our range of offers and are moving closer to number one in the market not only for private, but also for business customers," Drei Austria Chief Executive Jan Trionow said.

"In the future we will be the only real alternative to the former monopolist," he said, in an apparent reference to Telekom Austria, in which Slim's America Movil holds 51 percent and the Austrian state has a 28.4 percent stake.

The deal is expected to close this year, pending regulatory approval.

($1 = 0.8540 euros) (Reporting by Shadia Nasralla; Editing by Alexander Smith and Edmund Blair)