MILAN Hong Kong-based Hutchison Whampoa 0013.HK could end up with a 10 percent stake in Italy's Telecom Italia (TLIT.MI), if talks over a tie-up between Hutchison's Italian mobile phone business and Telecom Italia are successful, daily La Repubblica reported.
A separate report by Italian daily Il Sole 24Ore, however, said any stake would not exceed 20 percent.
Telecom Italia said on Friday it is in contact with the Hong Kong-based group over a possible integration with Hutchison's 3 Italia, also known as H3G.
"The contacts are in such embryonic and preliminary state that the company cannot make further comment," Telecom Italia said, adding the matter would be discussed at a board meeting on April 11.
Analysts estimate 3 Italia could be worth between 1.5 billion euros and 2 billion euros. Neither side gave any details of how a deal might be structured.
The report in La Repubblica on Saturday said that Telecom Italia might take over 3 Italia and issue new shares to allow Hutchison Whampoa to become one of its shareholders.
Allowing Hutchison to take a big stake, however, would unsettle the balance of power in Telecom Italia, which operates Italy's fixed-line telecoms network. The owners of holding company Telco currently control more than a fifth of the Italian telecoms group and may be reluctant to have their stakes diluted.
La Repubblica, without citing its sources, said that advisors were working on evaluations, but the common view was that the number of new shares that would be given to Hutchison Whampoa would not be bigger than a 10 percent stake, with a dilution of Telco's stake to around 20 percent from the current 22.4 percent.
Telecom Italia could not immediately be reached for comment.
Il Sole 24Ore, quoting unnamed sources, said Telecom Italia had ruled out allowing Hutchison a stake bigger than 20 percent and a deal would have to be part in cash and part in shares.
A merger with a cash component would be attractive to Telco's owners, La Stampa, another daily, said.
Telco is owned by Spanish telecoms operator Telefonica (TEF.MC), the largest investor, insurer Generali (GASI.MI) and banks IntesaSanpaolo (ISP.MI) and Mediobanca (MDBI.MI).
Spokespersons for the Italian owners of Telco could not be reached for comment. A spokesman for Telefonica declined to comment on media reports.
(Reporting by Francesca Landini, additional reporting by Clare Kane in Madrid; Editing by Susan Fenton)