France Telecom has its eye on C&W's internet unit, reports suggest

The French firm hopes to consolidate its UK interests, such as mobile phone operator Orange, and merge its internet business Wanadoo with C&W's Bulldog.

A tie-up would also give France Telecom greater access to the lucrative parts of the business market.

Both France Telecom and C&W were unavailable for comment on the report.

Market commentators claimed that a 22% jump in C&W's share price since May suggests that investors are preparing for a possible bid.

Potential hurdles

However, the UK based group was subject to similar speculation in May.

At the time experts dismissed any takeover attempt as any potential buyer could struggle to negotiate C&W's government licenses.

Meanwhile, the Sunday Telegraph added that France Telecom would also have to overcome a number of obstacles - including its pledge to investors that it would limit itself to spending just 500 million euros (�334m) on acquisitions this year.

France Telecom's finance chief Michel Combes is thought to be the driving force behind the plan, as he wants to merge the two firm's internet divisions under the brand Orange Internet.

The network of C&W's internet unit Bulldog now covers about 30% of the UK - making it more attractive to potential suitors - and C&W is planning to sink �190m into a new internet-based network over the next three years.

The group claims the investment will improve margins and benefit customers.

Earlier this month, C&W unveiled a 36% jump in group pre-tax profits before one-offs to �377m compared to �278m a year earlier.