An Italian daily said Telefonica is preparing a joint offer for the takeover of TIM Participacoes and split Telecom Italia's local wireless unit which is also called TIM Brasil, Reuters reported. The newspaper said the information was given by "reliable sources."

Last month, the antitrust watchdog of Brazil told the Spanish telecommunications group to either divest the interest it held in TIM Brasil or find a new partner for its Vivo mobile business which leads the market. The newspaper, Il Sole 24 Ore, said Telefonica is thinking of establishing an investment vehicle with its two main Brazilian mobile market competitors, which would purchase the unit and then break it up. Telefonica is a part-owner of TIM Brasil through the 15% stake it holds in Telecom Italia.

Carlos Slim's America Movil, which owns the mobile operator Claro, and Brazil-based Oi are the two rivals mentioned in the report. The paper said Pactual, an investment bank, is working on the transaction as the planned investment vehicle could get financing from state-owned lenders to encourage consolidation in the sector. The paper also said that an offer could be made for TIM Brasil before January will end and that the board of directors of Telefonica would be holding a meeting at the start of next week in order to tackle the matter.

Another Italian newspaper, Il Giornale, also said that the strategic committee of Telefonica may have a meeting on Monday to talk about the issue.

People knowledgeable about the matter told Reuters in December that Telefonica was given a year and six months to relax its hold on the mobile phone market in Brazil. This gave the company time to follow through its preferred option of a sale of TIM by Telecom Italia sometime in the middle of 2014 to the middle of 2015.