By Mathieu Rosemain

PARIS (Reuters) - French media giant Vivendi <VIV.PA> is considering suing Mediaset <MS.MI> for defamation after the Italian broadcaster denounced what it sees as an unacceptable u-turn on a deal regarding its pay-TV arm Premium.

"Vivendi reserves the right to sue Mediaset for defamation," a Vivendi spokeswoman told Reuters by phone on Thursday. "Mediaset's statements undermine the reputation of Vivendi. Vivendi will do whatever it takes to restore its reputation."

Mediaset has called Vivendi's change of heart abrupt and a surprise. Vivendi maintains that it warned Mediaset several times privately by letter that the terms of the deal may need to be revised.

Mediaset said earlier on Thursday that it rejected an alternative proposal by Vivendi for the sale of its pay-TV unit and that it too would seek legal action against the media group.