News Corp. scion James Murdoch is reportedly eyeing a potentially explosive expansion in Italy’s TV market with the purchase of Telecom Italia Media, which controls La 7.

The network is considered a possible threat to the duopoly in the terrestrial TV market formed by prime minister and media mogul Silvio Berlusconi’s Mediaset group of channels and pubcaster RAI, over which he also has sway.

The unconfirmed report published in Italo financial daily Il Sole 24 Ore Wednesday sent TI Media shares surging more than 5% on Milan’s otherwise largely negative stock market.

TI Media, which is awash in red ink, controls 77% of La 7 and 51% of MTV Italia.

While La 7 averages a 3.5% audience share, a recent relaunch centered on news-driven shows, pushed advertising up 30% in the first half of 2011, amid predictions the station could rapidly double its ratings.

Last month La 7 inked a deal for several specials with anti-Mafia author Roberto Saviano, a hot TV commodity, formerly on pubcaster RAI.

Berlusconi’s Mediaset and News Corp.’s paybox Sky Italia are increasingly acrimonious competitors in Italy. On Sunday, in their latest spat, Sky Italia pulled Mediaset Plus channel from its platform, claiming it was not delivering the expected content.

Analysts see La 7 as a good fit with Sky Italia, which has been looking to further expand into digital terrestrial free TV market, after launching its DTT station, Cielo, in 2009.