Telefonica, Telecom Italia owners deny bid report

* Generali, Intesa, Mediobanca say bid report unfounded

* Speculation follows Spanish minister comments

* Telecom Italia shares halve gains after denial

(Recasts, adds shareholders’ denial, shares)

By Nigel Tutt

MILAN, Jan 22 (Reuters) - The three Italian shareholders in Telco, Telecom Italia SpA's TLIT.MI largest shareholder, denied on Friday a report that Spain's Telefonica TEF.MC is preparing a bid for the Italian telecom company.

After the denial Telecom Italia shares gave up much of the gains made earlier in the session on a report in La Repubblica daily that Telefonica would make an all-share bid for Telecom Italia and pay a 25 percent to 30 percent premium.

In a joint statement, the three Italian shareholders in Telco -- Assicurazioni Generali GASI.MI, Intesa Sanpaolo ISP.MI and Mediobanca MDBI.MI -- said the newspaper report was "entirely without foundation".

Telco owns 24.5 percent of Telecom Italia.

The report had also said shareholders would set up a new vehicle, which would own Telco's stake in Telecom Italia and the 5 percent Criteria CRIT.MC holds in Telefonica. Criteria is the holding company for La Caixa, Spain's biggest savings bank.

Telefonica and Criteria declined to comment when contacted by Reuters.

Speculation on a possible takeover has mounted after Spanish Industry Minister Miguel Sebastian said this week Italy should be open to Spanish investors, when asked about a media report on a merger between the two operators.

At 1502 GMT, Telecom Italia shares were up 2.06 percent at 1.0420 euros, well off their high of 1.0740.

(Additional reporting by Francesco Segoni in Milan, and by Robert Hetz in Madrid; editing by Karen Foster and Simon Jessop)

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