Reports: Orange Mulls Potential Merger With Telecom Italia

(RTTNews) - French telecom major Orange SA (ORAN), previously known as France Telecom, is said to be looking at a merger with Italian phone carrier Telecom Italia SpA (TI, TIAOF), according to media reports on Sunday.

The reported Franco-Italian merger will create a new European behemoth amid the wave of consolidation across the European region.

Orange's interest in pursuing a merger was reported earlier by French newspaper Journal du Dimanche. However, Telecom Italia confirmed Sunday that there were no negotiations between the two companies, but just an exchange of points of view between the two management teams.

The companies believe that a consolidation in the European region will help battle the continuing fall in revenue per subscriber in the region. Meanwhile, revenues in the U.S. region has been on the rise in recent years.

The talks on a merger is expected to be complex due to the Telecom Italia's large debts and its shareholding structure. French conglomerate Vivendi SA (VIV.L, VIVEF.PK) is also set to receive a 5.7 percent stake in Telecom Italia as consideration for the agreed sale of its Brazilian broadband unit Global Village Telecom, S.A. (GVT) to Spanish telecom operator Telefonica SA (TDE.L, TEF), which holds a stake in Telecom Italia.

The move will be the latest in a wave of consolidation sweeping through the European telecoms industry.

In early February, UK-based fixed-line operator BT Group plc (BT_A.L, BT) agreed to a 12.5 billion British pounds deal to acquire EE Ltd., Britain's largest mobile network, from joint owners, Germany's Deutsche Telekom AG (DTEGY)and Orange.

In another recent deal, Hong Kong billionaire Li Ka-shing's Hutchison Whampoa Ltd. (HUWHY, HUWHF) entered into exclusive talks in late January to buy Telefonica 's U.K. operation for 10.25 billion pounds in cash or about 13.5 billion euros.

ORAN closed Friday's regular trading session at $18.20, down $0.14 or 0.76% on a volume of 0.41 million shares, and TI closed at $11.93, down $0.07 or 0.58% on a volume of 54,444 shares.