LONDON Blackstone (BX.N) and KKR (KKR.N) are weighing making offers for France Telecom's FTE.PA stake in Mobistar MSTAR.BR, sources familiar with the situation said, sharply boosting the Belgian group's shares.
The buyout firms are studying France Telecom's 52.9 percent stake in Mobistar, which is in an attractive sector for private equity at an achievable price, one of the people said.
Other private equity firms may be looking at the stake too, a second person said.
"Private equity firms are sounding out the debt markets to see what financing is available. This is very early stage and there is no guarantee a process will emerge," this person said.
A France Telecom spokeswoman said that the group did not have any knowledge of such offers, however.
A deal could value Mobistar at more than 3 billion euros ($4.3 billion), based on its recent trading levels.
France Telecom FTE.PA, Europe's fourth-largest telecoms company by market capitalization, is conducting a review of its European portfolio, opening the way for possible disposals or acquisitions.
The company is under pressure to tidy up its holdings after Vodafone (VOD.L) sold a series of minority stakes worth $23 billion and Deutsche Telekom (DTEGn.DE) exited the US.
France Telecom would not be able to justify taking control of Mobistar as part of that process because Belgium is a mature and low growth market, bankers said previously.
Mobistar shares rose sharply after the Reuters report, hitting their highest level since early February 2009, and just surpassing a March 24 spike when reports surfaced that France Telecom was planning to buy out the rest of the group.
France Telecom, which trails Vodafone, Telefonica (TEF.MC) and Deutsche Telekom in Europe, has since denied those reports.
At 1333 GMT, the shares changed hands for 51.67 euros for a 4.1 percent rise, having touched 53.33 euros earlier.
Mobistar's shares were trading at 50.2 euros before the news on Tuesday, valuing the business at about 3.2 billion euros, including some 200 million euros of net debt.
That equates to 5.8 times reported earnings before interest, tax, depreciation and amortization of 549 million euros for 2010, a figure analysts expect to fall in 2011 to closer to 500 million euros as the group faces fierce competition.
Belgium's second-largest mobile phone operator with more than 4 million customers, Mobistar has been branching into broadband and television services to keep up with its rival Belgacom BCOM.BR and the likes of Dutch rival KPN (KPN.AS), which has been muscling in on the market through its unit BASE.
Under Belgian takeover law, a move for more than 30 percent of Movistar would trigger a mandatory offer for the whole group.
Mobistar EBITDA dropped by 9.3 percent to 125.2 million euros ($183.7 million) in the first quarter, below the 131 million expected in a Reuters poll of ten analysts.
Blackstone, KKR and France Telecom declined to comment. Mobistar was not immediately available for comment.
(Additional reporting by Leila Abboud in Paris and Robert-Jan Bartunek in Brussels, Editing by Douwe Miedema and Louise Heavens)