Logo of France's Orange

Paris - French telecoms operators Orange and Bouygues said Tuesday they were in “discussions” on a possible buy-out by France's sector leader Orange of the smaller group that would consolidate one of Europe's most competitive telecoms marketplaces.

Orange announced it had “renewed preliminary discussions” with Bouygues, while the company headed by Martin Bouygues said in a separate statement that “a confidentiality agreement” had been signed Tuesday by the two groups.

“For the moment, no decisions have been taken and there is no guarantee that there will be an outcome to these preliminary discussions,” Bouygues added.

Press reports have for several weeks indicated that France's biggest telecoms operator and its number three were in talks on a possible tie-up which, if it went through, would reduce France's operators from four to three.

Bouygues said it would “attach decisive importance” in all its discussions to “the interests of Bouygues Telecom employees and to investment momentum within the sector, which must remain strong in the interests of the consumer”.

Orange stressed the discussions were “not limited by any particular calendar and hold no commitment to any particular predefined outcome”.

The group, headed by Stephane Richard, said it would be “particularly vigilant with regards to the value created through any resulting project”.

“The group is exploring the opportunities available within the French telecoms market, while keeping in mind that its investments and its solid position afford it a total independence in its approach,” it added.

Analysts had indicated that Orange, whose prime shareholder is the French state with a 20 percent stake, may be facing a crunch decision over whether to shore up its position at home by gobbling up a competitor, or expand its presence abroad.

Any merger between the two French telecoms operators would require the green light from competition authorities in both France and Brussels.

It would represent more than 60 percent of the mobile market, facing competition from operators SFR and Free.

In June, Martin Bouygues rejected a buyout offer by rival group Altice, which owns Numericable-SFR, and was equally unimpressed by a deal offered by Xavier Niel, the owner of the upstart French mobile and Internet operator Free Telecom.