Vodafone has confirmed it is having discussions with Liberty Global about a possible exchange of selected assets.
The two companies have been heavily linked with a merger as the European telecoms space continues to go through a period of consolidation.
Vodafone is the only major operator in the UK not to have engaged in any M&A activity while BT and EE, and O2 and Three have joined forces in recent months.
The company has acquired Ono in Spain and Germany’s Kabel Deutschland in recent years.
However, Vodafone said in a statement that a potential merger is not part of the talks.
The UK-based operator did not expand on which assets were being discussed.
Vodafone and Liberty have overlapping operations in the Czech Republic, Germany, Hungary, Ireland, the Netherlands, Romania and the UK.
Earlier this week, Orange Deputy CEO Gervais Pellissier said it would “make sense” for Vodafone to do a deal with Liberty in the UK, where the company owns Virgin Media.
It also owns brands such as Ziggo, Unitymedia, Telenet and UPC.
Telenet acquired Belgian mobile operator Base from KPN for €1.3 billion in April.
Meanwhile, Vodafone saw group service revenues for the last financial year fall 1.6 percent to £38.5 billion as Europe continued to drag on results.
Although it is investing heavily to upgrade its network infrastructure, it is still cash rich after divesting its stake in Verizon Wireless early last year.
Likewise, Liberty is investing in its network. Its Project Lightning will expand its high-speed broadband infrastructure in the UK.
Liberty saw like-for-like sales increase by over three percent in the first quarter.