MADRID, May 12 (Reuters) - Spanish telecoms company

Telefonica has hired Citi as an adviser to sell its

Chilean business, news website El Confidencial reported on

Monday, citing unidentified market sources.

Telefonica would book a capital loss on the sale, the news

website added.

Telefonica has withdrawn from many markets in

Spanish-speaking Latin American countries where returns were

lower than capital cost, opting to focus on Spain, Brazil,

Britain and Germany.

The company last month agreed to sell its Peruvian operation

at a fraction of its acquisition price 30 years ago.

(Reporting by Inti Landauro

Editing by David Goodman

)