(Adds context, Lasserre quotes)
By Leila Abboud and Sophie Sassard
PARIS Feb 27 (Reuters) - Bouygues, France's third-place mobile operator, has hired investment banks HSBC and Rothschild to advise it on a potential tie-up with larger rival SFR, two people close to the situation said.
Vivendi's SFR, second-place in mobile behind Orange, was put in play this week after Vivendi confirmed on Monday that it had been approached for a deal by Altice , the parent company of French cable operator Numericable.
Bouygues is now evaluating whether to make a bid for SFR, the people said, confirming a report in newspaper Le Figaro.
Yet, the construction-to-media conglomerate faces an uphill battle given that merging the number two and three mobile operators would certainly attract tough regulatory scrutiny, a handicap Numericable would not face because it is not in mobile.
Low-cost mobile upstart and broadband group Iliad is also studying whether to make an offer for SFR, said a person familiar with the group's strategy. It could not be determined if Iliad has hired banks to advise it.
A telecom banker said any combination of SFR with either Bouygues or Iliad would be tough for regulators to sanction given the large size the combined group would have.
"To some degree, Iliad and Bouygues have to look at SFR again now, just as a matter of house-keeping and good management because Numericable is moving in on SFR," said the person.
"My prediction is that the SFR and Numericable deal is what gets done. The rest of it is just noise."
After five days of media reports on SFR's suitors, France's top competition watchdog Bruno Lasserre told Le Monde newspaper on Thursday that any consolidation would have to be approved by him and he had seen no concrete proposals yet.
"If a deal for a merger among mobile operators comes before us, we can say 'no' or 'yes but' without preconceived notions," he said.
"But these are complex deals that involve listed companies and that need to be examined very closely."
The uncertainty around SFR's future looks set to continue as the potential suitors stake out their positions.
Meanwhile, Vivendi has been preparing to split off SFR from its other media businesses in a deal expected this summer.
But it could still opt for an outright sale of SFR if the prices and terms offered are attractive, a person close to the company said.
A decision on whether to move ahead with the split or accept an offer to sell SFR would likely be made sometime in March, the person added.
A spokeswoman for Bouygues was not immediately available to comment. A spokesman for Vivendi declined to comment. (Additional reporting by Gwenaelle Barzic; Editing by Maya Nikolaeva and David Evans)