MILAN Silvio Berlusconi's broadcaster Mediaset is close to selling its pay-TV unit to Vivendi, three sources close to the matter said, a move that would strengthen the French media group's grip on Italy.
Vivendi is already the top shareholder in Telecom Italia with a 23.8 percent stake and is seeking to build a southern European heavyweight.
The pay-TV talks are being led directly by Mediaset Chief Executive Pier Silvio Berlusconi, the son of the former Italian prime minister, and Vivendi Chairman Vincent Bollore, the sources added.
"Pier Silvio is determined to sell and a deal could be signed shortly," one of the sources said.
The source said that Vivendi is seeking to buy Mediaset's entire 89 percent stake in the unit, for which it would pay half in cash and half in Vivendi shares. Vivendi declined to comment.
The remaining 11 percent in Mediaset Premium is held by Spain's Telefonica, which it bought last year in a deal valuing the whole unit at around 1 billion euros ($1.1 billion).
Another source said the two groups could also set up a European joint venture over content, seeking to "create a player that rivals Sky at the European level".
Mediaset Premium is loss-making but in 2014 bought prized exclusive rights to broadcast Champions League soccer matches in Italy for an estimated 700 million euros, giving it a powerful commercial advantage over Sky Italia.
Bankers said it was difficult to understand why Mediaset Premium would appeal to Vivendi, saying it had no synergies with the French group's Canal+ unit.
However, bankers and analysts have said buying Mediaset Premium might be a precursor to a bigger deal that could see Vivendi, which has a cash pile of 6.4 billion euros, taking control of Mediaset and even merging it with Telecom Italia.
Some insiders say that getting the Berlusconi family to reduce its influence in the TV space could be a major hurdle, although other observers say that the conservative tycoon-turned-politician may eventually decide to sell given his political decline and the need to settle succession issues.
Vivendi has already taken an increasingly hands-on approach at Telecom Italia after nearly tripling its stake in less than a year. It has four seats on the phone group's board and media reports say it is actively looking for a replacement for CEO Marco Patuano.
Bollore's long-term ambitions for the former Italian monopoly however remain unclear, fuelling speculation about possible tie-ups with other telecoms or media players.
Telecom Italia's shares rose sharply on Wednesday after French President Francois Hollande said there could be cooperation between France and Italy in key industrial sectors, including telecommunications. Standing by his side, Italian Prime Minister Matteo Renzi said he would welcome any serious investment that created jobs and helped boost the economy.
Hollande's comments came after the chief of Orange said he would look into the possibility of a deal with Telecom Italia if Bollore asked him to, but he said that he did not think this would happen.
Mediaset share closed up 6.8 percent, outperforming a 1.4 percent rise in the European media index.
(Additional reporting by Gwenaelle Barzic in Paris and Sophie Sassard in London, writing by Agnieszka Flak, editing by Silvia Aloisi and Elaine Hardcastle)