An alliance between Beppe Grillo's anti-establishment 5-Star Movement and Italy's centre-left could pave the way for tough conflict of interest rules, forcing Silvio Berlusconi to choose between politics or his vast media empire.
Born out of a daring bet on commercial television in the 1980s, the former prime minister's Mediaset has become one of Europe's largest broadcasters with the help of soft Italian anti-trust laws and a favourable regulatory environment.
Now Pier Luigi Bersani, whose centre-left formation won control of the lower house in last week's inconclusive election, says he wants to pass a tough conflict of interest law that could force Berlusconi to shed the jewel of his 4-billion-euro empire.
"An agreement between Bersani and Grillo could mean a downsizing of Mediaset or possibly force Berlusconi to chose between politics and ownership," said Francesco Siliato, communications professor at Milan's Polytechnic university.
"Berlusconi has every interest in ensuring that everything remains as it is."
It still remains unclear whether Bersani will manage to form a government or persuade populist Grillo to back him through a vote of confidence or by voting for individual laws.
But Grillo, whose election campaign spurned television in favour of the Internet and live public meetings, has promised to get rid of Italian monopolies and has singled out broadcasting as one of the sectors that needs to be opened up.
Bersani, who ruled out a grand coalition with Berlusconi saying the centre-right leader had "no concept of responsibility beyond his own interests", has also spoken in favour of an overhaul of Italy's communications sector.
"If the centre-left and the 5-Star Movement converge into an alliance, Mediaset would certainly be a potential victim," said Claudio Aspesi, analyst at Sanford Bernstein in London.
"The market is underestimating the possible regulatory risks the company is facing."
Shares in Mediaset have fallen about 11 percent to their lowest in two months since the election, underperforming a 2 per cent fall in the blue-chip Milan index and giving it a market capitalisation of around 1.8 billion euros.
Berlusconi's ownership of Mediaset, which captures more than 60 percent of television advertising spend, has long been an anomaly that critics say has been a major factor in his dominance of Italian politics for almost 20 years.
Being forced to choose between business and politics would undermine the very nature of the 76-years-old tycoon's formula of mixing politics and media.
The three-time prime minister controls a financial empire that spans top-flight soccer team AC Milan, Italy's biggest book publisher Mondadori and Spanish broadcaster Mediaset Espana.
His eldest son and Mediaset deputy chairman Pier Silvio, 43, also sits on the board of Italy's most powerful investment bank, Mediobanca.
According to a February study by three European university professors which looked at data on elections back to 1994 when Berlusconi first ran for office, the longer Mediaset was established in a region the stronger the support for his party.
Longer exposure to Mediaset broadcasting lifted his share of regional votes by an average of 1-2 percentage points, said the study by Ruben Durante at Paris's Sciences Po, Paolo Pinotti of Milan's Bocconi university and Andrea Tesei of London's Queen Mary university.
The potential political problems for Mediaset could compound a steady increase in commercial pressure that has slowly undermined its dominance alongside the impact of Italy's harsh recession on its advertising revenues.
It closed 2012 with its first-ever annual net loss and is also expected to end in the red this year, hit by the economic slowdown and competition from News Corp pay-TV unit Sky Italia and web players like Google Inc.
Media industry experts say that after failing to diversify into TV production and turn its pay-TV unit into a profitable business, Mediaset remains tied to an outdated business model which is too focused on traditional advertising.
In the wake of the election, Citi analyst Mauro Baragiola warned investors he expected advertisers to further tighten their belts, noting how during the campaign television proved was less efficient than the web in attracting voters.
"Mediaset needs more innovation (difficult) or to scale down its operations to a smaller cash-cow broadcaster," he said.
© Thomson Reuters 2013