MEXICO CITY (Reuters) - Mexico's government said on Monday it had reached a deal with concession-holders, including MVS Multivision, to recover 68 percent of available space in the country's disputed 2.5 GHz spectrum, which could boost competition in the telecoms sector.

The government decided to reclaim the spectrum after MVS and other companies failed to use it to develop high-speed networks. The issue had been tied up in legal wrangling for years.

"Recovering this spectrum for the nation strengthens the state's ability to achieve greater broadband service coverage," the ministry said.

Ifetel, a new telecoms regulator created under a major telecoms reform passed earlier this year, will be able to auction the concessions totaling 130 MHz, immediately if it wants to, Mexico's transport and telecommunications ministry said in a statement.

It said nine out of 11 concession holders, including MVS Multivision, had voluntarily given up shares of the spectrum.

It added that concessions for the remaining 60 MHz had been extended for 15 years.

President Enrique Pena Nieto's telecom reform seeks to increase competition in phone and Internet services, which are dominated by Carlos Slim's America Movil, and in television, where Emilio Azcarraga's Televisa holds sway.

The reform includes provisions to "guarantee the optimal use of the 700 MHz and 2.5 GHz bands under the principles of universal, non-discriminatory, shared and continual usage."

(Reporting by Tomas Sarmiento)