Plans to turn Orange into the world's leading mobile phone brand could take a step forward after reports that it is in wide-ranging talks with German operator E-Plus.

Orange is aiming to strike a roaming agreement with E-Plus that would enable the UK firm's German venture MobilCom to launch as a network operator. MobilCom currently sells mobile and fixed line phones, as well as an internet service provider, but wants to be able to offer customers a complete phone package.

The two parties are also talking about sharing the costs of constructing third generation networks.

Analysts speculate that a link-up between the two could eventually lead to a full takeover of E-Plus by Orange, given the priorities of E-Plus's principal backers. One is BellSouth of the US which is said to be looking to sell its stake. The other is KPN of the Netherlands which is laden with debts.

Analysts believe regulators would clear a merger.

Orange was refloated on the London Stock Exchange in February after being bought from Vodafone by France Telecom. Shares in the company quickly fell below their issue price but have recovered despite tough market conditions.

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