UPDATE 1-Rai, Sky Italia talks take political turn

* Rai could pull free channels from Sky

* Murdoch in Italy on Thursday

(Updates Rai figures, Mediaset viewing numbers)

By Jo Winterbottom

MILAN, June 17 (Reuters) - Italy's public broadcaster Rai has raised the possibility of pulling its popular free-to-air (FTA) channels from Rupert Murdoch's Sky Italia, newspapers said, as contract talks between them become tangled in politics.

Rai's main competitor in FTA is Mediaset (MS.MI: Quote, Profile, Research), which is owned by Prime Minister Silvio Berlusconi, and its new head, Mauro Masi, was a top civil servant at the cabinet office. In pay television, Sky Italia is the leader, ahead of Mediaset.

"The conflict of interest of Berlusconi will raise many, many doubts about things going on in the (TV) market," said Fabrizio Perretti, professor of strategy in media industries at Milan's Bocconi University.

In the past few weeks, Berlusconi has accused Murdoch of mounting a personal attack on him after articles criticising his government appeared in The Times newspaper.

He suggested the comments were connected with a doubling of value added tax on Sky Italia's pay television.