French low-cost telecoms operator Iliad has reportedly offered four to five billion euros for rival Bouygues Telecom.
Iliad’s boss, Xavier Niel, is trying to capitalise on the price war he sparked by launched a mobile phone service 18 months ago.
That competition put pressure on French operators to consolidate.
Bouygues is struggling and up for sale after failing to buy French No.2 carrier SFR, but the Bouygues parent company reportedly wants seven to eight billion euros.
Orange, the largest French operator, is also interested in taking over Bouygues but would face competition issues and sources have told Reuters that no firm decision has yet been made to go ahead with a bid.
The French government is keen to see the number of domestic telecom firms reduced to three; it believes tough competition in the sector is hurting jobs and investment in high-speed broadband.
Meanwhile Bouygues Telecom is due to hold a works council meeting on Wednesday at which management is expected to present its restructuring plan.
It said on May 15 it was looking for an extra 300 million euros ($411 million) in annual cost savings by 2016. Union sources have said they fear between 1,500 and 2,000 job cuts.