* Ball in talks to take ITV CEO role-source
* ITV shares opened up almost 6 percent
* Analysts would welcome the move, expect rights issue (Adds details, reaction, share price)
By Kate Holton
LONDON, Sept 10 (Reuters) - Former BSkyB boss Tony Ball is in talks to become the next head of broadcaster ITV, a person close to the matter said, raising hopes that a refinancing and radical rethink for the company could be near.
The source said Ball was negotiating the terms of his contract, sending shares in the group up over an initial 5 percent in early morning trading.
ITV, Britain's biggest free-to-air broadcaster, declined to comment.
If appointed, Ball's timing could not be better, with analysts predicting a rebound in advertising markets and a reduction in regulation following a torrid couple of years marked by the dramatic slump in ad revenues.
Analysts also expect the new management would receive enough goodwill from investors to support a rights issue.
"I think a rights issue would go down quite well," RBS analyst Paul Gooden said. "In order to have a rights issue you need to have a CEO that people like and respect.
"And hopefully he'll have a fair wind of deregulation and an improved trading environment.
"I think he is the obvious choice and I think he will probably bring some cost-cutting zeal and perhaps some radical thinking and I think he is exactly what is needed."
Ball's relationship with board members and management may be slightly trickier however, after appearing to promote himself for the role through the media, at the expense of several internal candidates.
The Times newspaper reported on Thursday that the ITV nomination committee was expected to meet on Friday to resolve any remaining issues over the contract, which were not thought to be serious.
The paper said Executive Chairman Michael Grade was expected to remain as chairman "in the near term, although it is unclear whether they will forge a long-term partnership".
Grade, who joined ITV in late 2006 after walking out of the publicly-owned BBC, said in April he would step back from the day-to-day running, and media reports have speculated that he could leave once a new chief executive was in place.
During Grade's time, the company's share price slumped from over 100 pence at the start of his tenure to under 20 pence in March, before slowly recovering to 55 pence on Thursday on signs that the advertising slump had hit the bottom.
"Fund managers want to buy cyclicals at the moment, and they particularly want to buy cyclicals with good management that is well regarded," said Panmure analyst Alex DeGroote. But any new chief executive will still face difficult decisions about how to compete and produce the best content and how to develop new revenue streams.
One analyst said the problem with reacting to Ball's possible appointment is that no one yet knows quite how radical he might be.
Analysts at UBS have suggested putting ITV's digital channels on pay-TV platforms to secure a guaranteed income not affected by advertising patterns, while Gooden suggested putting some of the best programmes on pay-TV before repeating them on free TV a day later. (Reporting by Kate Holton; Editing by Greg Mahlich and Rupert Winchester)