Italy govt prefers Telefonica merger for Telecom Italia to Sawiris - paper

A Telecom Italia antenna booster is seen in northern Rome November 12, 2012. REUTERS/Alessandro Bianchi

MILAN (Reuters) - The Italian government would prefer a merger between Telecom Italia and Spain's Telefonica, rather than a deal allowing Egyptian tycoon Naguib Sawiris to buy into the Italian phone company, Il Messaggero said on Friday. The paper said the government was putting the brakes on the idea of Sawiris buying a stake in Telecom Italia. It gave no reason for not favouring Sawiris, who made a previous failed attempt to buy into the Italian company. It also said Telecom Italia Chairman Franco Bernabe had told Italy's Prime Minister Enrico Letta that the company might need a capital injection of between 3 billion euros (2.5 billion pounds) and 5 billion to avoid its credit rating being cut to "junk" status. No-one at Telecom Italia or the Italian Prime Minister's office could immediately be reached for comment. Telefonica declined comment. A source close to the situation told Reuters on Thursday Sawiris had contacted the core investors who want to sell their shares in the Italian telecoms operator. Telecom Italia is controlled by core investor Telco, in turn controlled by Mediobanca, Intesa Sanpaolo, Generali and Telefonica. The core shareholders are considering the options of Sawiris and Telefonica since there are no other solutions on the table, Il Messaggero said. Bernabe is seeking a new investor ahead of a board meeting on September 19. (Reporting by Stephen Jewkes; Editing by David Holmes)