Telefonica, under pressure to loosen its grip on Brazil’s mobile market, is reportedly hatching a plan to sell TIM Participacoes to rivals.

According to Il Sole 24 Ore, quoting unnamed but “reliable sources”, Telefonica is close to setting up a financial vehicle to split up TIM Participacoes, the second-largest mobile operator in Brazil, and sell it to Claro (owned by Carlos Slim’s America Movil) and Oi.

The deal, should it go through, will necessarily involve the break-up of TIM Brasil. TIM Brasil, owned by a Telecom Italia holding company, controls TIM Participacoes.

According to Reuters‘ reading of the Il Sole 24 Ore report, Telefonica is looking to set up the investment vehicle with Claro and Oi.

The complicated manoeuvring follows last month’s decision by Cade, Brazil’s antitrust watchdog, that Telefonica must either exit its stakeholdings in TIM Brasil or get a new partner for its Vivo mobile subsidiary.

The Spanish and Latin American giant irked Cade by breaking a 2010 agreement not to raise its stake in Telecom Italia (TIM Brasil’s parent company).

By increasing its stake in Telco, which owns 22.4 per cent equity in Telecom Italia, Telefonica gained effective control of the Italian incumbent.

And given Telefonica also wholly-owns Vivo, Brazil’s largest mobile operator in terms of subscribers, it claims more than half the country’s mobile market when taking into account its direct and indirect stakes in TIM Brasil.

A TIM sale should therefore placate Brazil’s regulator.

Although shares in Telecom Italia rose after the report by the Italian newspaper, the country’s incumbent has insisted in the past it would be unwilling to sell and that the Brazilian operator was a strategic asset.

It is a position Telecom Italia repeated in a statement today (3 January), quoted by Reuters, in which the Italian incumbent added it was not aware that any offer had been made for its unit in Brazil.

Other details to emerge from the Il Sole 24 Ore report, cited by Reuters, is that investment bank Pactual is said to be working on the deal.

The financial vehicle, adds the paper, could also receive financing from state-owned banks to promote consolidation in the sector.

An offer for TIM Brasil could be ready before the end of the month, reveal Il Sole 24 Ore sources.

The Telefonica board may meet as early as next Monday (6 January) to discuss the matter.