Talks between Benelux phone groups Belgacom and Versatel may not end in a full tie-up but could instead lead to the creation of a media company with Versatel investor Talpa, Talpa said on Friday. A spokesman for Talpa denied a newspaper report on Friday that the company, an investment vehicle of billionaire television producer John de Mol, wanted to merge with Belgacom and Versatel, in which it has built up a 42 percent stake. Instead, he suggested, the discussions revealed last week could lead to a some form of co-operation or joint venture encompassing media holdings.

"If the talks succeed, they could result in creation of a media company with the three companies as shareholders," said Talpa spokesman Thomas Notermans.

He added that De Mol, who has been instrumental in launching the Versatel-Belgacom talks, was not simply seeking to cash out of Versatel, but wanted to remain a shareholder.

Belgacom declined to comment, while Versatel officials were not immediately available to respond.

Versatel shares had fallen 3 percent to 1.94 euros by 0927 GMT, giving it a market capitalisation of about 1 billion euros.

Some Versatel investors are worried that discussions on other forms of co-operation could delay or scupper an eagerly awaited buyout offer, though analysts said the company remained a tempting target for competitors.

"Let's not forget that not too long ago there was talk that Tele2 and TeliaSonera might be interested," said Frank Claassen, analyst at Rabo Securities in Amsterdam.

He added that it was still unclear what kind of co-operation Talpa had in mind.

The Belgacom/Versatel discussions have been tripped up by news earlier this week that Dutch prosecutors are investigating possible insider dealing around the 1999 flotation of Versatel.

Copyright Reuters, 2005