Sir Peter Bonfield ponders his transatlantic options

According to the Wall Street Journal, AT&T's chairman C. Michael Armstrong and BT's chief executive Sir Peter Bonfield have met several times during the past month to discuss how such a link-up could work.

The talks are at a very early stage. Neither company has consulted any investment banks on the deal, nor have the firms' boards been involved.

British Telecom

Employees: 137,000 Revenue: �21.9bn ($32.8bn) Profit after tax: �2.01bn ($3.01)

The two companies have dismissed the report as "rumour and speculation" and have declined to comment on it.

"It is not unusual for them to have a conversation," a BT spokesman said.

BT and AT&T are partners in the Concert alliance, a venture offering global telecoms services to multinational businesses and other telecoms operators.

There have been discussions about a tie-up between the companies before.

However, quite apart from the immense task of welding two such different firms together, a merger is likely to be closely investigated by regulators on both sides of the Atlantic.

AT&T

Employees: 160,000 Revenue:$62.6bn (�41.8bn) Profit after tax: $5.45bn (�3.6bn)

According to the report, no deal is imminent, and it is "still unclear whether the informal talks will lead to negotiations".

The merger, though, would allow BT to compete with rapidly expanding European rivals like Deutsche Telekom, France Telecom and mobile giant Vodafone.