Telecom Italia SpA's (TIT.MI) core shareholders have agreed to renew their pact for another three years, business daily Il Sole 24 Ore reported Saturday.

The agreement would end speculation about the fate of Telefonica SA (TEF.MC) as the biggest single shareholder in the Italian telecommunications giant.

After intense talks held this week, Telefonica and the four other core shareholders agreed to renew their pact when it expires in April 2010, the daily said without identifying its sources.

The shareholders, which together own a holding company called Telco that has a 24.5% stake in Telecom Italia, were to come to an agreement by Oct. 28. Insurer Assicurazioni Generali SpA (G.MI), bank Intesa Sanpaolo (ISP.MI), merchant bank Mediobanca SpA (MB.MI) and the Benetton family are the other four shareholders.

One of the conditions to the pact's renewal was to grant shareholders the right to leave the pact after 18 months of its renewal, the daily said.

Through Telco, Telefonica has a 10% indirect stake in Telecom Italia.

Recent news reports had spoken about the shareholders being dissatisfied with Telecom Italia's performance and accusing Telefonica for doing nothing about it.

Italian politicians had also raised fears about a foreign company having control over the country's fixed-line network run by Telecom Italia because they considered it a strategic asset.

Telefonica has repeatedly said its stake in Telecom Italia is part of a long-term industrial alliance.

-Gilles Castonguay, Dow Jones Newswires; +39 02 5821-9908; gilles.castonguay@dowjones.com