Spanish incumbent Telefonica is looking to buy a 5.5 per cent stake in Telecom Italia (TI) from a Pirelli unit for around Eur1.3bn, the UK’s Financial Times has reported.

Citing people close to the deal, the FT said it remains far from sealed because TI’s management and board have yet to agree whether or not having Telefonica as a large investor suits their long term strategy

Pirelli controls an 18 pct stake in Telecom Italia through the holding company Olimpia SpA. Over the last twelve months there has been speculation that Telefonica could buy a stake in Olimpia. However, the FT suggests the Spaniards are asking for guarantees that Pirelli will not sell the remaining stake in Telecom Italia to a rival operator.

TI is scheduled to hold a board meeting on March 8 to approve its full-year results.