WestLB, the German investment bank, has offered British Telecommunications about £18bn for its entire fixed-telephone operations.
A consortium, put together by WestLB, approached Philip Hampton, BT's finance director, several weeks ago with the offer. It comes just one week after BT received an £8bn bid for its "local loop" network – the final connection between the telephone exchange and homes and offices.
A spokesman for the bank, which specialises in structured finance and large-buyouts, said the idea had been discussed but he declined to go into further details at this early stage. WestLB is still finalising its consortium members.
The bid would be financed almost entirely by borrowing and would include a £5bn cash payment. As with BT's local telephone network, the fixed-line business is difficult to value, but WestLB is believed to have offered BT at least £18bn.
BT declined to comment. A spokesman said: "We get approaches all the time. We have nothing to say about this one specifically."
The telecoms operator is understood to be unwilling to review the offer until it has completed the demerger of its mobile phone arm, BT Wireless, to leave it with a business known as Future BT.
Last week, it emerged that BT had rebuffed an £8bn bid for its local-loop network from Earthlease, a consortium comprising two finance houses, Babcock and Brown and Chancery Lane Capital. The proposal, made on 9 May, is thought to have been an all-cash deal, financed by debt. BT turned down Earthlease's offer, on the grounds that it is not looking to sell its local-loop assets.
WestLB's approach could set the scene for a bidding war because Earthlease is understood to be prepared to make a hostile bid for BT as a last resort. If WestLB's approach is successful, the consortium would take over the entire British fixed-telephone line infrastructure from BT – including the local loop. It would then lease capacity on the local loop back to BT and other telecoms companies.