Telecom and its partner, state broadcaster RAI, need to move fast to turn their long-held digital dreams into reality but face intense political pressure to keep the project Italian-led and Murdoch - whose cash and expertise would be key - out.
Telecom says it wants to secure an agreement in time for a board meeting on Friday and a RAI spokesman said "things should be clearer in a day or two". Murdoch's camp declined comment.
Despite much media speculation and reports that Murdoch was ready to offer the Italian soccer league $2.5 billion for pay television rights, industry sources say a deal is far from sealed and precious time is ticking away.
Since an overture to the Australian-born media baron was made, no concrete proposals had been worked out and "no meaningful discussions" had taken place, said one source.
The soccer league currently sells collective television rights for all 38 clubs in Serie A and Serie B. A spokeswoman for the league said it had received no bids from Murdoch.
Rival French-controlled operator Telepiu has not only beaten Telecom and RAI to digital, but also stolen a march on what analysts and insiders say will be the secret of its success.
Telepiu, which is 90 percent owned by Canal Plus, has trumpeted an exclusive five-year broadcast deal with four of the biggest names in Italian soccer - Juventus, Inter Milan, AC Milan and Napoli - that it expects will pull in the punters.
Paul Gordon, media analyst at Milan-based investment bank IMI said it was not far-fetched to say digital's future hinged on soccer.
"It's the only thing I can think of that Italians are sufficiently mad about, prepared to stump up more cash for and aren't seeing enough of at the moment," he said.
With football the star attraction, Gordon said it was not clear there was room for two competing digital platforms, noting that German and Spanish rival pay-TV operators were finding the going tough. He forecast it could turn into "a great big fight".
"It's a total mess," agreed one London-based analyst.
Telecom and RAI, whose original plans to forge a single digital deal with Telepiu fell apart six months ago, still hope to overpower their rival by signing up the media world's biggest gun, Murdoch, and netting attractive soccer rights of their own.
As boss of the huge News Corp, Murdoch is the most powerful media mogul on the planet and has built up expertise through his British satellite broadcaster BSkyB, which has exclusive rights to screen English premier league soccer. He is also a hard fighter and has deep pockets.
Murdoch this month stunned the soccer world by bidding just over $1 billion for Manchester United, one of the most famous names in British soccer. The club would help him expand his empire and give him immense power if a planned breakaway European Super League becomes reality.
That league, which would also feature Juve, Inter and Milan as key players, would be a potential pay-television gold mine.
Analysts say continental Europe is a gap in the News Corp portfolio - Murdoch was in Milan this month to discuss a possible European alliance that Silvio Berlusconi's Mediaset has been hatching with Germany's Kirch Group.
Under the right circumstances, analysts say Italian pay-television could appeal to Murdoch.
But industry sources say Murdoch will not take a back seat in the digital alliance Telecom and RAI want to build around Telecom's loss-making unit Stream, adding that less than a 30-35 percent stake would not make it worth his while.
RAI, which is believed to be worried about the financial drain of digital, does not have the cash to match the influence it would like and is under pressure to make up its mind as a political storm gathers.
With Telepiu in French hands, the centre-left government is determined to see Italians get a slice of the digital action and considers Murdoch a monopoly-grabber with an un-European style.
"I'm convinced there are other solutions," Communications Undersecretary Vincenzo Vita said of the possibility of a partnership with Murdoch, in L'Unita newspaper this week.
RAI is state controlled and the Italian Treasury is Telecom's single biggest shareholder.
Telecom and RAI have been struggling for months to firm up their digital plans after the European Commission warned an original project involving all Italy's main broadcasters was unlikely to get the green light on competition grounds.
Telepiu went ahead with its D+ digital service while RAI and Telecom in April announced a joint-venture deal to set up as a rival and France's TF1, which is controlled by the conglomerate Bouygues said it was interested in joining.
Telepiu is losing money but said this month it was confident of hitting its goal of 500,000 subscriptions for digital programmes and aimed to double soccer subscriptions to 300,000.
But Telecom and RAI had been slow spotting the soccer rights race and one source said that without a deal soon, "they're going to miss the boat".
La Repubblica newspaper wondered on Tuesday whether Telecom now faced a stark choice - ditch RAI and form an alliance with Murdoch or risk its television dreams being left on the shelf.
Reuters
The future of digital television in Italy is shaping up into a scrap over soccer as Telecom Italia strives to hammer out a deal by Friday and global media baron Rupert Murdoch considers whether to join in.
