MasMovil, which was taken over by three buyout funds including KKR last year, has set a first valuation of the Vodafone unit at 7.5 billion euros ($8.96 billion), the newspaper said.
Expansion did not say who would control the merged entity if a merger proceeded.
A MasMovil spokesman said he could not immediately comment, while a spokesman for Vodafone declined to comment.
Back in September, MasMovil and its private equity owners denied a previous press report about merger talks between the two rival telecom operators. $1 = 0.8375 euros Reporting by Inti Landauro; Editing by Jan Harvey