South Africa-based Telkom said it is in discussions regarding a potential transaction to acquire all of the shares in mobile operator Cell C.
In a brief statement, the company said it was currently performing due diligence on Cell C, and advised shareholders to exercise caution when reacting to any information on the matter until a further announcement had been made.
Reuters noted that Cell C is the country's third-largest mobile operator and would bring around 20 million subscribers to the fixed-line player, which now also provides mobile services.
No indication was given on price, although analysts said this would be critical to the success of any merger.
"We know for sure that the combination of Cell C and Telkom is a good idea from a business perspective but it only makes sense if it's done at the right price," Avior Capital Markets equity analyst David Lerche told Reuters.
Oger Telecom South Africa owns 75 per cent of Cell C and has previously said it would consider selling its stake.
In April, Cell C said it would invest ZAR8 billion (€520 million/$561 million) in building an LTE network over the next three years, as it seeks to improve its position in the highly competitive market of South Africa. The network went live in September with services offered initially in Gauteng and KwaZulu-Natal, reported fin24tech.
The company signed supply agreements with Chinese vendors Huawei and ZTE, and said the two network equipment suppliers would be its primary partners in the rollout of more than 4,000 LTE sites.
Cell C competes with larger rivals Vodacom -- which is 65 per cent owned by Vodafone -- and MTN South Africa.
In June, Vodacom gained approval subject to conditions for its plan to buy fixed-line operator Neotel for ZAR7 billion. Both Cell C and MTN oppose the move as they say it would be harmful to competition.
South Africa's Cell C to invest ZAR8B in LTE over 3 years
Orange sees LTE as 'foundation of ICT' in Africa
LTE in Africa: Newcomers Smile and Surfline join Orange and Vodafone in lighting up 4G networks
Telkom SA welcomes minister's call to help fund national broadband
Vodacom picks Alcatel-Lucent for FTTH network in convergence drive