Bahrain Telecommunications is in talks to buy Cable & Wireless Communications' Monaco and Islands businesses in a deal which could be worth up to $1bn (£610m).
CWC said it had received an initial approach but added: "At this point, there can be no certainty that the discussions will lead to a transaction."
Batelco, as it is known, failed to buy a stake in the indebted mobile group Zain Saudi last year, and has continued to look for alternative deals to offset stagnant revenues in its home market.
Talks are said to be ongoing but are not yet close to any conclusion.
CWC's Islands business groups a far-flung collection of 11 islands, ranging from the Maldives to the Falklands. Monaco Telecom also holds a 37 per cent stake in the Afghanistan mobile group Roshan.
The whole division had revenues of $586m last year, from some 543,000 mobile subscribers and 125,000 fixed-line customers.
CWC has been hit by a serious fall in revenues from its major business in the Caribbean and halved its dividend in May. The company actually had a stake in Batelco.
Batelco also has interests in Jordanian and Yemeni mobile operators and broadband providers in Kuwait and Saudi Arabia.
Cable & Wireless Worldwide, which was demerged from CWC two years ago, has been taken over by Vodafone for £1bn.
Shares in CWC closed nearly 5 per cent higher at 38.25p.