Telecom Italia denies share swap talks with News Corp.

ROME — With speculation mounting that Rupert Murdoch’s News Corp. is on the verge of a major content deal with Telecom Italia, the government stepped in on Tuesday warning it would keep “a close eye” on the talks.

“The government is following the matter closely,” communications minister Paolo Gentiloni told reporters on Tuesday. The concern is that Murdoch and Telecom Italia will cut a vastly larger deal that would swap more than programming rights for their growing TV businesses, but would see key assets of the former state-run telecoms power go into the media mogul’s hands.

Over the past week, Italian newspapers have been reporting the two firms are on the verge of a deal in which Murdoch would exchange his stake in the Sky Italia satellite venture for shares in Telecom Italia’s holding company Olimpia.

Last week, Telecom Italia said the nature of the talks involved a content tie-up, and, it stressed, that a larger share swap was not part of the ongoing talks. Industry analysts have also noted there would be tremendous regulatory obstacles to such a deal.

Still, the government is anxious to show it will not sit on the sidelines should negotiations escalate. On Tuesday, Il Corriere della Sera reported that the government may consider a pre-emptive move to make a potential share acquisition in Telecom Italia less attractive. According to the paper, the government could force Telecom Italia to sell its most prized asset — the telecommunications grid — to a third party, in this case, state lender Cassa Depositi e Prestiti, or CDP. CDP later on Tuesday denied the report.

Murdoch’s Sky Italia, a satellite TV network, and Telecom Italia, owners of terrestrial broadcaster La 7 and a controlling stake of MTV Italia, have rapidly growing digital and terrestrial TV businesses for which they are scrambling to supply with new programming.

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