Swisscom and Vodafone have agreed on a preliminary purchase price of 8 billion euros ($8.66 billion) on a cash and debt-free basis, the Swiss telecommunications provider said in a statement.

Swisscom plans to merge Vodafone Italia with its local subsidiary Fastweb, it added.

Shares in Swisscom were up almost 2% in Julius Baer premarket trade at 0706 GMT.

Vodafone is set to hold a minority stake in a combined entity with Swisscom's Italian unit, three people familiar with the matter had told Reuters.

A deal with Fastweb would create Italy's second-largest fixed-line broadband operator behind Tim , with a strong presence in the prized business segment.

According to analysts, the deal would also face lower regulatory hurdles than a combination with Iliad but offers lower potential synergies.

Vodafone had previously rebuffed an offer from French telecom operator Iliad to merge their Italian businesses.

($1 = 0.9238 euros)

(Reporting by Paolo Laudani, Editing by Rachel More)

By Paolo Laudani