US telecom equipment maker Lucent Technologies and French rival Alcatel have confirmed they are discussing a potential merger of equals.
They said in a joint statement that a deal, if concluded, would be "priced at market", meaning that no premium on their stock prices is contemplated.
But the companies, which have a combined market capitalisation of more than $34 billion, said there could be no assurance that an agreement would be reached and no further comment would be provided until an agreement is reached or the discussions are terminated.
The companies broke off earlier merger talks in 2001 after smaller Lucent baulked at the idea of a takeover, rather than a merger of equals.
At the time Alcatel was interested in Lucent's fibre optic business. Lucent had initially agreed to hold a 42 per cent ownership stake in the combined company, with Alcatel having majority control.
Lucent's sales have fallen by more than half since 2001, while Alcatel's have fallen by almost half, after the bursting of the telecom and Internet bubbles and consequent cutbacks in orders from customers.
Lucent saw its first-quarter revenue fall 12 per cent to $2.05 billion, with US revenue down 7 per cent and international revenue off 20 per cent.
Alcatel posted better-than-expected fourth-quarter profits and sales last month, however, as telecom operators invested more in new video services.