(Adds further comments from call) MILAN, May 11 (Reuters) - The...

(Adds further comments from call)

MILAN, May 11 (Reuters) - The head of Telecom Italia (TIM) TLIT.MI said the company's service business is "already sustainable" as a standalone entity and is expected to generate strong core profit this year.

Chief Executive Pietro Labriola on Thursday asserted that TIM had a viable future should he manage to complete the sale of its domestic landline grid, its most prized asset.

Those efforts to do a deal have been thwarted so far by valuation issues, with top investor Vivendi VIV.PA wanting a higher price and also calling into question the sustainability of the remaining business.

The French group is seeking a valuation of 31 billion euros ($34.1 billion) to back a network sale, about 10 billion euros above the level of non- binding bids TIM has received.

Labriola on Thursday reiterated that the sale of the grid remained the main option to deal with debt, adding that avoiding antitrust issues will be key in the evaluation of any offer.

Speaking to analysts, Labriola said the service part of the company's business, which includes its domestic consumer and enterprise service operations and TIM's Brazilian unit "is already sustainable" as a separate entity.

Labriola said the service arm would generate "combined pro-forma core profit after lease significantly above 3 billion euros in 2023".

Under pressure for years on its home turf, TIM late on Wednesday reported an annual 3.8% rise in its quarterly core earnings at group level, helped by its Brazilian unit TIMS3.SA while core profit in its key domestic business declined further and debt rose.

Labriola said TIM is "fully on track" to meet its financial targets for the year, including a "potential slight growth" of domestic core earnings.

Last week TIM set a final deadline of June 9 for rival suitors KKR KKR.N and a consortium comprising Italian state lender CDP and Macquarie (MQG) to improve their bids.

CDP, which owns a 10% stake in TIM and Macquarie are co-investors in TIM's smaller rival Open Fiber. ($1 = 0.9084 euros)