BT is in early-stage talks to takeover UK mobile operator O2, which it sold off in 2001, and sources say it has also begun negotiations with EE.
The former British telecoms monopoly is looking to return to the British consumer mobile market. Both the company and O2’s Spanish owner Telefonica have confirmed they were in talks after Spanish website El Confidencial reported that O2 could be sold in return for a 20 per cent stake in BT as part of a "strategic alliance" to strengthen the two groups.
BT also said it was in talks with another British mobile operator, which two sources close to the matter identified as EE, owned by Orange and Deutsche Telekom.
"We have received expressions of interest from shareholders in two UK mobile network operators, of which one is O2, about a possible transaction in which BT would acquire their UK mobile business," BT said. "All discussions are at a highly preliminary stage and there can be no certainty that any transaction will occur."
BT is already working on a complicated plan to get back into consumer mobile by using a combination of its own airwaves, in-home receivers that route calls over its fixed-line network, Wi-Fi hotspots and fill-in capacity rented from EE to undercut other mobile providers.
The firm purchased £186m worth of 4G radio spectrum last year to make itself less reliant on EE to fill in the gaps between its Wi-Fi hotspots, but technical difficulties related to making the 'handover’ between Wi-Fi and the mobile network seamless could delay the roll-out of the system, due to go live next year.
Purchasing a readymade mobile network could represent a simpler solution for BT, which leads the British market in broadband, and while Telefonica has said that O2 remains core to its business it has not ruled out asset sales to meet a target to reduce debt to less than €43bn ($34bn) by year-end.
A Telefonica executive did not rule out a sale of O2 at an industry conference last week, saying the company would have to "evaluate its options" if more of the market moved to bundling fixed and mobile telecoms services.
"We value O2 UK at €12bn (£9.6bn) compared to a BT market cap of £31bn," said UBS analysts in a note to clients. "An integration would be a sound strategic move for both companies in our view, given the complementary nature of their operations and their seemingly very good commercial fit."
Deutsche Telekom and Orange, which put plans for an initial public offering of EE on ice this year, had no immediate comment on the reports.