The discussions emerge amid heightening speculation that BT will bid for C&W, which for months has been the subject of takeover rumours. C&W's stock market value is almost pounds 10bn.
BT declines to comment on any potential bid. However there is a view in the City that the company could launch a joint takeover with AT&T of the US, which is thought to be interested in acquiring C&W's Mercury subsidiary in the UK.
BT is keen to expand in areas where C&W has strengths, including the Asia Pacific region. According to Peter Bonfield, BT's new chief executive: "To be the most successful global telecommunications company in 20 to 30 years time we will need to be much bigger in the East."
Some City analysts believe that C&W is ripe for breakup and has been rendered more vulnerable by the recent boardroom battle which resulted in the ousting of Lord Young, chairman, and the chief executive, James Ross. The group, which has yet to appoint a new chief executive, is seen by some as increasingly directionless.Reuse content