Telefonica said on Monday it had not received any indication of interest from AT&T, following a Spanish newspaper report that the government had halted a 70 billion-euro ($93 billion) offer from the U.S. company.

An AT&T representative told the government about the company's plans to buy Telefonica and take on its 52 billion euros of debt, leading the state to stop the sale, El Mundo said on Monday, citing sources with knowledge of the deal.

"Telefonica has not received any approach or spoken or written indication of interest," a spokesman for Telefonica told Reuters.

The government has mechanisms to block the sale of any company deemed strategic to the national economy, El Mundo cited sources as saying. According to the paper, the matter was debated in the Economy and Industry ministries, as well as in Prime Minister Mariano Rajoy's office.

AT&T has been looking this year at ways it can grow outside the United States, including via acquisitions and expanding its business serving enterprise customers.

A takeover of Telefonica would make it the biggest telecoms company in the world, with a market capitalization of almost 300 billion euros, according to El Mundo.

Debt-laden Telefonica's revenues have been hit by the economic downturn in Europe, especially in Spain, where 27 percent of the workforce is unemployed. Latin America now counts for over half the company's revenues.