As the financial investors of Telecom Italia SpA is preparing to cut off its funding, the possible future of the telecommunications firm is at the hands of Telefonica SA, another heavily indebted carrier. 

The discussions would be between Telecom Italia directors with Telefonica SA and it would revolve around the price differences to double its holdings to buyout Assicurazioni Generali SpA, Mediobanca SpA and Intesa Sanpaolo. This was confirmed by people familiar with the matter, who spoke on condition of anonymity as these matters were confidential. The Spanish telecommunications firm owns a 10.4% indirect stake with a value of EUR1.1 billion or USD1.5 billion.

The alternative would be Telefonica to participate in the capital increase led by Telecom Italia that would not be matched by its partners in Telco SpA, the holdings company. Telco owns a 22.4% stake in the Italian carrier.

Telecom Italia CEO Franco Bernabe does not have too much time, as Moody's Investors Service in August allowed the firm three months to improve on Telecom Italia's balance sheet or else the company would be downgraded of its investment-grade rating, according to an individual with knowledge of the matter.