French telecoms market leader Orange is in talks about a tie-up with Bouygues Telecom, France's economy minister said yesterday after two sources said the discussions could lead to Orange acquiring its smaller rival.

The discussions bring Orange, the former France Telecom monopoly, into the frame for the first time in moves to consolidate the industry, but industry sources wondered how far talks could go between the biggest and third-biggest mobile service providers, given the likely antitrust hurdles.

They said the manoeuvring could be aimed instead at raising the potential price of Bouygues Telecom for rival Iliad, whose upstart 'Free' mobile service sparked a price war two years ago.

Orange chief executive Stephane Richard has discussed the matter with Martin Bouygues, his counterpart at Bouygues. A deal would value Bouygues Telecom at more than six billion euros ($8.2 billion).

Asked in a televison interview about reports of the talks, French Economy Minister Arnaud Montebourg said "they exist" but that there were "multiple discussions" taking place in the industry. Orange also said it was "exploring opportunities" and favoured consolidation.-Reuters