Tokyo Electric Power Co. <9501.T> plans to sell its shares in KDDI Corp <9433.T> to help pay for compensation costs stemming from the disaster at its Fukushima Daiichi nuclear power plant, a newspaper reported on Sunday.

Asia's largest utility, also known as TEPCO, holds about 360,000 shares in KDDI, or a 8 percent stake, which are worth about 180 billion yen ($2.17 billion) at the current market price, the Nikkei business daily said.

TEPCO has already approached Japan's second largest mobile phone operator with the proposal, the Nikkei said, quoting people familiar with the matter.

It was still unclear if TEPCO will sell all of its KDDI shares or when it will sell them, the paper added. TEPCO will likely sell the shares to several institutional investors through brokerages to soften the impact on the stock price.

TEPCO, operator of the Fukushima Daiichi plant hit by a massive earthquake and tsunami on March 11, said last week it would make an initial compensation payment of 50 billion yen to residents around the plant.

Residents were forced to evacuate the area after a loss of cooling functions at the plant led to radiation leaks.

President Masataka Shimizu has said he did not know how much the final bill for compensation would be.

JP Morgan has estimated TEPCO could face 2 trillion yen in compensation losses in the financial year that started this month, while Bank of America-Merrill Lynch has said the bill could reach $130 billion if the crisis continues.

(Reporting by Chisa Fujioka; Editing by David Chance)