Hutchison's 3 Italia held T.Italia talks: report

MILAN (Reuters) - Hutchison Whampoa (0013.HK) unit 3 Italia held talks with Telecom Italia (TLIT.MI) on a merger but the two parties could not agree on the price, 3 Italia's chief executive was quoted as saying in an Italian newspaper on Friday.

Vincenzo Novari said the prospective deal broke down on price and market competition issues, according to the report in the Il Sole 24 Ore financial daily.

The merger would have seen 3 Italia subsequently broken up, the newspaper said.

"There were differences on the share swap ratio. The value attributed to the Telecom Italia shares was too high for us. The difference has stopped the operation," Novari was quoted as saying.

Despite the deal falling through, Novari said there were four options for the future of 3 Italia, which operates a third generation mobile telephone network, including videotelephony and handheld TV.

He said the first option was the Telecom Italia merger, which would include Italy's telecom operator Wind taking over 3 Italia customers and technology. Novari said he saw this option as "the least probable."

The other options are a sale to a Middle East sovereign fund, the sale to a non-European operator of a 50 percent stake in H3G, the company which owns the 3 brand, and 3 Italia continuing as an independent company, he said.

Novari said he excluded the possibility of "a break-up" of 3 Italia, along the lines of Italy's Blu telecom operator in 2002, which saw its assets such as tax losses, radio frequencies and customers going to different rivals.

"At the start of 2009 we will launch new initiatives. We wouldn't do it if we had in mind a break-up of the activities," Novari was quoted as saying.

(Reporting by Nigel Tutt; Editing by Greg Mahlich)