After a number of days of speculation, EE has announced that it is in "exploratory talks" with British Telecom (BT) about a potential buyout.
Earlier this week, while confirming it was in talks with Telefonica about a potential purchase of the O2 mobile network, BT added that it was also talking to an unnamed second UK mobile operator, with widespread speculation that it was EE.
In a statement EE's joint shareholders Deutsche Telekom and Orange said it was in "exploratory talks with BT even though it is too early if the transaction will happen. The companies said they regularly track the UK mobile market to keep an eye on any strategic opportunities that could create value for shareholders.
EE is the UK's largest mobile phone network with 28 million subscribers and it reported sales of £1.59 billion for the last quarter. It was created in 2010 through a merger of Orange and T-Mobile in the UK and has positioned itself well in terms of 4G coverage, being the first UK operator to launch the next-generation network.
The combination of BT and EE would bring together the UK's largest fixed-line operator with the UK's largest mobile operator
BT is looking to get back into the mobile phone market having spun off its BT Cellnet operation as O2 in 2001 and selling it to Telefonica in 2005 for £17.7bn.
BT is looking to offer a quad-play bundle to its subscribers as the UK market converges, with the likes of TalkTalk and Virgin Media already offering these bundles of mobile, broadband, TV and landline.
Sky is also said to be considering launching its own virtual network to compete with the likes TalkTalk, BT and Virgin.