ROME — Vivendi and Silvio Berlusconi’s Mediaset are in advanced negotiation stages on an alliance with far-reaching implications involving a stock swap agreement that would see the French media giant gain control of the Italian broadcaster’s Mediaset Premium pay-TV unit, according to sources which have confirmed several news reports

More importantly the Vivendi/Mediaset pact now being finalized could create an integrated pan-European pay-TV platform and content production with sufficient scale to compete with Sky and Netflix in Europe.

The alliance, which is expected to be announced as early as next week, would see the two groups swap respective stakes of roughly 3.5% and agree to include members of each other’s company in their respective boards.

Since Vivendi’s market worth is roughly six times greater than Mediaset’s equity value, the Berlusconi-owned company would make up the difference by giving Vivendi a majority stake in its pay-TV business. Mediaset Premium has an equity value estimated at roughly $1 billion. Mediaset and Vivendi reps have declined comment.

The strategic vision behind the pact is said to transcend pay-TV, extending to joint content creation and distribution. The first step could be the creation of an OTT platform, which would merge Mediaset’s now separately operated Infinity Italy and Infinity Spain services with Vivendi’s German OTT service Watchever.  A further step would be teaming up on exclusive content creation.

Vivendi chairman Vincent Bollore, who has a close rapport with the Berlusconi family that goes back a long way, is clearly eying Italy as a key plank of his announced expansion plan. He recently raised Vivendi’s stake in Italian telco Telecom Italia to 24.9%, forcing its CEO Marco Patuano to resign and replaced him with another Italian, Flavio Cattaneo, who was the top manager at mammoth Italian pubcaster RAI during the time when Silvio Berlusconi was prime minister. It is not clear what Cattaneo’s role could be in the creation of a pan-European media company, but there is speculation he could play an important role.

The Paris-based conglomerate, which is the parent company of European film-TV group StudioCanal, comprising the Canal Plus paybox, and Universal Music Group, is also in talks to acquire a stake in leading Italian film and TV production company Cattleya.