Vodafone has held informal talks with Telecom Egypt about selling its 55% stake in Vodafone Egypt, the country's second-largest mobile company, sources familiar with the matter said.
Telecom Egypt, Egypt's monopoly fixed-line phone operator, has made an approach, though no banks have been appointed and a deal is not imminent, the sources said.
Telecom Egypt has been indicating its interest in entering the mobile market for some time, said Mike Millar an analyst at investment bank Naeem.
"The Vodafone offer could mean they are planning to do it through an acquisition, not through a potential fourth licence," he said.
"If that is the case, I think it is quite positive for them. On the other hand, it would not be so good for Mobinil."
Egypt's mobile market is fiercely competitive and is dominated by Mobinil, jointly owned by Orascom Telecom and France Telecom, and Vodafone Egypt.
Etisalat Egypt, a unit of UAE-based Etisalat, is the third-largest player.
Analysts have said that any new entrant will likely need to focus on poorer users to gain a foothold.
Telecom Egypt, which owns the remaining 45% of Vodafone Egypt, and Vodafone declined to comment.
Shares in Vodafone recovered on the news, first reported by the Financial Times, after three days of declines, gaining 1.7%.
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