A report said French market leader Orange is eyeing smaller rival Bouygues Telecom, although the latter denied it was planning to exit the telecoms sector.

A Bloomberg report said Orange was in early discussions with Bouygues about acquiring its telecoms and media interests with the latter maintaining a minority stake in the business.  Under the proposed deal, Bouygues would retain its construction business.

A tie-up with its smaller rival is just one option being studied by Orange.

Bouygues responded with a blunt statement claiming “it has no plans to withdraw from the telecoms and television sectors and reaffirms its long-term presence in these two industries”. Orange declined to comment.

Consolidation talk of course is not new in France. In fact Orange was previously linked to a Bouygues Telecom bid in 2014. The country’s operators have been eyeing potential deals since the arrival of Iliad and its aggressive pricing strategy in 2012.

However, any deal would face significant antitrust hurdles, as well as political objections from the French government. A reduction in the number of competitors from four to three would potentially face the scepticism of the European Commission.

In addition, the French government has expressed concern about any job losses from mergers in the telecoms sector.

In June, Bouygues was reported to be the subject of a €10 billion bid from rival SFR-Numericable. Ministers criticised the potential threat to jobs and investment.

In 2014, Bouygues tried to buy SFR but was beaten by Altice (Numericable). Subsequently, Orange was linked to its bid for Bouygues.

If Orange’s rumoured takeover proved successful then it would combine the market leader with fourth placed Bouygues Telecom to create an entity with 33.7 million mobile connections (GSMA Intelligence Q3 2015 figures), equivalent to 53 per cent market share. The remaining two operators would have market shares of 30 per cent (SFR-Numericable) and 18 per cent (Iliad).