Telefonica said it opened negotiations with an unnamed company in the Mexico mobile market, following an earlier report the Spanish giant was in takeover talks with smaller rival Iusacell.
The Spain-headquartered operator confirmed the move in a regulatory filing.
A Telefonica-Iusacell combination would unite the country’s second- and third-largest operators, although the proposed entity would still lag far behind market leader America Movil, which is facing major regulatory pressure because of its size and influence in the mobile market.
The merger talks were first reported by El Confidencial.
America Movil intends to offload assets as it seeks to reduce its market share in response to scrutiny from the country’s regulator.
Telefonica has been suggested as a possible buyer for some America Movil assets.
Talks between Telefonica and Iusacell are thought to have been going on for some months.
Iusacell is co-owned by TV giant Televisa and billionaire Ricardo Salinas. It operates only in Mexico.
A Telefonica-Iusacell combination would have approximately 27 million mobile connections, according to GSMA Intelligence (Q2, 2014 figures), equivalent to a 27 per cent market share.
Despite its boost in market power, the new entity would still lag the dominant force in the country’s mobile market, America Movil, which has 71 million mobile connections.