MILAN (Reuters) - The Berlusconi family's investment firm could take a stake in Telecom Italia (TLIT.MI) as part of a plan to settle a dispute with French media company Vivendi (VIV.PA), Il Messaggero newspaper said on Wednesday, citing advisors.
Berlusconi's Fininvest, the biggest shareholder in Italian broadcaster Mediaset (MS.MI), has been at loggerheads with Vivendi since July when the French company pulled out of an agreement to buy Mediaset's pay-TV business Premium.
Vivendi, whose chairman and biggest shareholder is Vincent Bollore, has since built up a 28.8 percent stake in Mediaset, a move that has angered Fininvest, riled the Italian government and unleashed lawsuits.
Vivendi, which owns French TV channel Canal Plus and Universal Music, is also the biggest investor in Telecom Italia with a 24.9 percent stake and the government is worried that Bollore could end up with too much influence in corporate Italy.
Il Messaggero said the proposal to bury the hatchet would involve Vivendi cutting its Mediaset stake to 9.9 percent and selling 9.9 percent of Telecom Italia to Fininvest.
In addition, Vivendi would get two seats on Mediaset's board and Fininvest two on Telecom Italia's, the paper reported, adding that the overall proposal appealed to former prime minister Silvio Berlusconi.
Vivendi and Mediaset declined to comment.
Vivendi's stakebuilding has raised questions about Bollore's intentions and whether these include a future combination of Mediaset with Telecom Italia, which has made distribution of content via broadband a growth priority.
Italy's antitrust regulations prevent companies from having an excessive exposure to both telecommunications and media and Vivendi's move into Mediaset is already the subject of a regulatory inquiry.
Any cross shareholding between Mediaset and Telecom Italia would also be likely to prompt alarm bells in government circles and analysts said the plan outlined in Il Messaggero would be difficult to implement.
Two sources close to the matter said the idea of Fininvest buying Telecom Italia shares has never been on the table. Mediaset CEO Pier Silvio Berlusconi also said in January it was not interested in a stake in Telecom Italia as part of a broader Vivendi deal.
One of the sources said that any decision on the dispute between the two groups had been suspended anyway pending an inquiry by Italian communications regulator AGCOM into Vivendi's stakebuilding at Mediaset.
"In any case, if Vivendi has to make a choice between Mediaset and Telecom Italia, it will choose to keep Telecom Italia shares," the person close to the matter said.
One analyst also said it would be hard for Vivendi to place 18 percent of Mediaset at market prices and doubted the French company would be willing to sell at a loss.
There was little share reaction to the newspaper report with Vivendi down 0.2 percent by 1218 GMT, Mediaset down 0.5 percent and Telecom Italia up 1.2 percent.
Reporting by Agnieszka Flak and Giulia Segreti in Milan, Gwenaelle Barzic in Paris, Mathieu Rosemain and Sophie Sassard in Barcelona; editing by Louise Heavens and David Clarke