Telecom Italia-Orange Deal
Orange CEO Stephane Richard in FebruaryReuters

Shares in Telecom Italia traded higher on 2 March on news that it has been discussing a possible alliance with France's Orange.

Telecom Italia's stock was trading 2.35% higher at 10.06am in Milan, valuing the firm at €20.08bn (£14.6bn $22.5bn), after Orange's chief executive Stephane Richard told the Journal de Dimanche that the former monopolies have been discussing a potential tie-up.

Orange's stock was trading 0.21% lower at 10.05am in Paris, valuing the firm at €43.14bn.

Pursued by Reuters, a spokesman for the heavily indebted Telecom Italia said there had been no talks over a possible tie-up with Orange.

An Orange spokesman did not immediately return a request seeking comment.

Meanwhile, Richard seemed confident Orange will be able to convince the French government, which holds a 25% stake in the operator, of the value of a cross-border deal.

Richard told the weekly newspaper: "There are no negotiations ongoing just exchanges of points of view between the two management teams.

"It would be an attractive European consolidation opportunity.

"The state will agree to slightly loosen its grip for Orange to do a major transaction.

Last month, BT finalised a deal to buy EE, the UK's largest mobile phone operator, from its parent firms Orange and Deutsche Telekom for £12.5bn in cash and shares, seeing the telecom giant re-enter the mobile phone market after more than a decade.

Deals in the European telecoms sector thus far have taken place within national markets and not across borders, as the former results in rapid and large cost savings.

However, European lawmakers hope that the emergence of regional champions will occur eventually through cross-border consolidation.