By Gwénaëlle Barzic
MADRID/PARIS (Reuters) - French telecoms group Orange
The source said Orange has not yet made a decision regarding a possible offer.
Earlier, online newspaper TMT Finance reported that Orange has hired investment bank Credit Suisse as an adviser to look at Euskaltel, based in northern Spain, and with a market value of 1.3 billion euros (£1.1 billion).
A merger would allow Orange greater access to Spain's growing broadband market and Euskaltel's 800,000 clients.
Credit Suisse and Euskaltel declined to comment.
Euskaltel's main shareholder is Spanish bank Kutxabank, which holds 21.3 percent, followed by British fund Zegona
Zegona said on Monday it was raising funds with the aim of increasing its ownership of Euskaltel by up to 12.5 percent.
(Aditional reporting by Andrés González; Editing by Jean-Michel Bélot, Ingrid Melander, Mark Potter and Alexandra Hudson)