UPDATE 2-Spain's Telefonica says eyeing deal in Mexico

Wed Jul 30, 2014 12:20pm EDT

(Adds comments from Salinas Pliego)

MADRID/MEXICO CITY July 30 (Reuters) - Spain's Telefonica confirmed on Wednesday it in talks over a possible deal in Mexico, where for years it has tried to take market share from Carlos Slim's America Movil, after a report said it was close to buying mobile company Iusacell.

The Spanish firm said it had not reached any agreement. Sources close to the group said any deal was not likely to be imminent.

Earlier on Wednesday website El Confidencial, citing unnamed sources close to the talks, reported Telefonica was close to acquiring Mexico's third-largest wireless telecoms company Iusacell, worth up to 3 billion euros ($4 billion).

Telefonica declined to comment specifically on whether it was negotiating an acquisition of Iusacell.

Ricardo Salinas Pliego, the Mexican billionaire owner of Grupo Salinas, said via Twitter on Wednesday that his 50 percent stake in Iusacell was "not for sale."

"Telefonica says it wants to buy Grupo Salinas' stake in Iusacell. It is not for sale," Salinas Pliego said on his Twitter account @RicardoBSalinas.

A spokesman for Grupo Televisa, which owns the other half of Iusacell, declined to comment.

Mexico's notoriously concentrated telecommunications sector is being prised open by a reform led by President Enrique Pena Nieto to encourage competition.

Telefonica has about 20 percent of Mexico's cellphone subscribers while Iusacell has about 8 percent, well behind Slim's America Movil, which has about 70 percent.

But America Movil said earlier this month it would divest assets in an unprecedented step to cut its market share below 50 percent in response to the toughest regulations in over 20 years, fuelling competitors' hopes that the market would become more competitive.

Analysts said a potential tie-up between Telefonica and Iusacell, while positive, would not drastically change market conditions in Mexico, which accounts for just around 1 percent of the Spanish firm's core profit. ($1 = 0.7461 Euros) (Reporting by Julien Toyer and Andres Gonzalez in Madrid and Christine Murray in Mexico City, editing by Louise Heavens and Cynthia Osterman)