Discussions concerning a tie-up between German operators O2 Germany and E-Plus are reportedly advancing as the parent firms of the networks look to spin-off their respective assets in the country.

While a link-up between the operators has been rumoured for some time, it is thought that E-Plus’s parent, Dutch group KPN, is keen to spin-off the asset to ward off what it sees as a hostile takeover by America Movil. O2 Germany’s parent Telefonica announced plans to sell its German unit two week ago.

A source told the Financial Times that there is “enough movement between parties” to make a deal likely. Another source told the newspaper that KPN could announce the spin-off of E-Plus within two weeks.

America Movil is attempting to buy a 28 percent stake in KPN, though the Dutch group described the EUR8 per share offer as “not in the interests of all shareholders and other stakeholders.” According to the Financial Times, the spin-off of E-Plus at a higher price would siphon off shareholder interest and make KPN’s shares less attractive to the Mexican group.

“A merger of E-Plus and O2 Germany would add enough value to KPN’s share price to deter investors from accepting AMX’s bid – and may even force an increase – in which case management would be able to argue it had acted resolutely for shareholders,” Espirito Santo wrote in a note.

E-Plus is currently the third largest operator in Germany, according to Wireless Intelligence figures, with 23 million subscribers. While it lags Vodafone Germany and T-Mobile Germany, it is larger than Telefonica’s O2 Germany, which has 18.6 million customers.

Analysts say a co-operation between E-Plus and O2 could also unlock some EUR4 billion in annual synergies in the German mobile market, provided it was approved by regulators.

While Telefonica had previously been thought keen to buy E-Plus outright, a co-ordinated spin-off or joint venture is now the most likely option, says the Financial Times.