Russian telecoms group Vimpelcom (VIP.O) is in talks with Asia's Hutchison Whampoa (0013.HK) about merging their mobile phone businesses in Italy as a joint venture, Vimpelcom Chief Executive Jean-Yves Charlier said on Wednesday.

"We are in discussions with Hutchison regarding a possible equal joint venture between 3 Italia SpA and Vimpelcom's subsidiary WIND Telecommunicazioni SpA," Charlier said in comments sent to Reuters.

"There can be no assurances that an agreement will be signed and any transaction would be subject to, among other things, achieving satisfactory debt levels and obtaining all required corporate and regulatory approvals."

Combining Italy's third-largest mobile network operator Wind with fourth-placed 3 Italia would cut the number of competing operators in Italy to three, as has already happened in Germany, Austria and Ireland, reducing competitive pressures and helping end a long price war.

The two sides have been in on-off talks for well over a year.

But hammering out terms has proven difficult given the interests of Asian tycoon Li Ka-shing, who controls Hutchison, and Vimpelcom's controlling shareholder Russian billionaire Mikhail Fridman, whose LetterOne fund holds 47.9 percent of Vimpelcom's voting rights.

The companies are still not yet close to signing a deal, said two sources familiar with the matter. No decision has been made on who would run the merged entity, said one, and Wind's high debts remain an issue.

Bloomberg said on Tuesday that the two had agreed that Wind's chief executive, Maximo Ibarra, would take the helm.

In October Vimpelcom acknowledged in a filing with the U.S. Securities and Exchange Commission that it had held unsuccessful talks over a joint venture in Italy, without naming the company involved.

A 50-50 joint venture would be a change of strategy for Hutchison, which has been buying up competitors across its European markets in the past two years, starting in Austria, then Ireland, and most recently agreeing to buy Telefonica's (TEF.MC) British arm O2 UK.

However the structure could be an attractive option for both sides given their current situations, analysts said. Hutchison's balance sheet is stretched by recent deals and Vimpelcom wants to retain exposure to countries outside Russia.

"Wind's debt remains the major obstacle to a full takeover by Hutchison," said one of the sources, adding that with a joint venture structure Hutchison can avoid taking on the debt.

Wind is larger and more profitable than 3 Italia, earning 4.6 billion euros in sales and 1.8 billion euros in operating profit last year. 3 Italia's annual sales were 1.73 billion euros and operating profit was 248 million euros.

Wind's debt at the end of last year stood at 9.65 billion euros. It recently completed the sale of some 7,000 radio masts in Italy to Spain's Abertis (ABE.MC) for 693 million euros.

Vimpelcom's shares were up 5 percent at $5.82 in New York by 1746 GMT, while shares in Telecom Italia and Vodafone both closed up 1 percent as investors bet they would benefit from having fewer competitors.

In terms of customers, Wind and 3 Italia would have 33.3 percent of the Italian market, according to end-December data from communications regulator AGCOM, compared with 32.1 percent for Telecom Italia and 27.5 percent for Vodafone.

But the three operators would be nearly even in terms mobile service revenues earned in the country, according to Citigroup.

Since European and national regulators have already approved the market consolidation in Germany, Ireland and Austria while requiring measures to protect competition, so analysts believe a deal could get approved.

Hutchison did not return a request for comment.

In first-quarter results on Wednesday, Vimpelcom said sales in Italy slipped 6 percent to 1.1 billion euros ($1.24 billion), surpassing Russia for the first time.

Group revenue fell 30 percent to 3.52 billion euros ($3.98 billion) hurt by the weak rouble, while operating profit fell 33 percent to $1.4 billion. The company said it was on track to deliver its 2015 targets.

Vimpelcom has 218 million customers across Russia, Italy and a dozen emerging markets including Ukbekistan and Ukraine. It is owned by Norway's Telenor (TEL.OL), which holds 43 percent of its voting rights, and Fridman, the Russian businessman.