French defence firm Thales on Friday dismissed reports that it had lost a $1 billion bid to supply a border surveillance system to Saudi Arabia, but took a swipe at prices offered by rivals.

France has been battling for years to land a wider border fence contract - dubbed Miksa after the Ministry of Interior of the Kingdom of Saudi Arabia - which is designed to shield the world's largest oil exporter.

Recent reports have said European aerospace group EADS looks poised to win the first phase of the deal, which had once seemed a solid bet for Thales.

Franco-German-controlled EADS represents Germany in a race that also includes Raytheon of the United States.

"No-one has won the Miksa contract...rumours are just rumours," Thales chairman and CEO Denis Ranque told analysts on a conference call.

However an industry source close to the talks said Thales was out of the running and that EADS was the prime contender, while cautioning that a deal had often seemed close in the past without coming to fruition.

Ranque indicated that Thales was backing away from stiff price competition in a tender for the border surveillance system and said "we will not take contracts at any margin".

Last June, executives at its Saudi business partner told Reuters that a consortium led by EADS was favourite to win the initial contract for a $1 billion razor-wire fence along the 900-km border with Iraq.

The fence would be monitored by thermal imaging and radar equipment and is part of a wider defence plan to secure the Gulf state's 6,500 km perimeter, seen as potentially worth 7 or 8 times more than the Iraqi border contract.

Interior Minister Prince Nayef has said the border fence is essential because of violence in Iraq and sectarian fighting.

Saudi Arabia wants to bolster security by adding hundreds of radar facilities, coastal detection centres, telecommunications networks and reconnaissance aircraft around the country.-Reuters