A unit of Libya's sovereign wealth fund is in talks to buy a 35% stake in state-owned Tunisie Telecom from a conglomerate owned by Dubai's ruler, three sources aware of the matter said.

Dubai Holding's arm, Emirates International Telecommunications LLC (EIT), is trying to reduce debt and is set to take a huge hit on the stake it bought for $2.25 billion in 2006. J.P. Morgan Chase valued it at $650 million in July.

The company has been hit by political and economic turmoil since the popular uprisings in the region that started in 2011.

LAP GreenN, a subsidiary of the Libyan Investment Authority's (LIA) Libya Africa Investment Portfolio (LAP), is doing due diligence on the potential purchase, the sources said, and has hired an international investment bank to advise it, one of the sources said. LIA has assets of about $60 billion.

LAP GreenN officials were not available for comment.

EIT said in a statement that it "carries regular strategic options reviews which could materialise in a disposal including for its stakeholding in Tunisie Telecom".

Set up in 2007, LAP GreenN offers mobile and fixed line services and has operations in operations in Uganda, Ivory Coast, South Sudan and Sierra Leone.

Tunisia has a population of about 10.5 million and mobile penetration of 95%. Tunisie Telecom has more than 4 million mobile subscribers and a million for fixed lines.

In June, Tunisia said 13 companies including Abu Dhabi-based Etisalat and Turkey's Turkcell had expressed interest in buying the stake.

But the sources said most of those companies had only expressed an initial interest and backed away from discussions.

"A potential buyer has to be aware of the political risks associated with the purchase. A niche player like LAP GreenN is best positioned for that. This is not for every telco firm out there," a regional telecoms banker said.

"The key thing in this deal will be how LAP GreenN gains access to funds to purchase this stake," the banker said.

Dubai Holding is among the group of companies badly hit by the financial crisis. Many of its units have had to restructure debts. But the emirate's economy is recovering thanks to a rebound in tourism, services and the property market.

Credit Suisse is advising Dubai on the sale process. EIT has also put its 26% stake in retailer Axiom Telecom up for sale, sources said in June.