France Telecom has announced plans to get its hands on the 14% of mobile phone firm Orange that it does not already own.
The French telecoms giant said it planned to submit an exchange offer for Orange shares to French regulatory authorities, valuing the deal at 7.1bn euros (£4.95bn).
The news sent Orange shares soaring and they eventually closed up 90 pence, more than 15%, at 672.5p in London. France Telecom shares ended down nearly 4% at 21.72 euros.
Orange investors were also encouraged by a results update which saw the mobile firm lifting its projections for the rest of the year.
The mobile unit made a net profit of £151.9m in the first six months of the year, compared with a loss of £348.6m in the same period a year earlier.
And a doubling of revenues, together with signs that customers are starting to upgrade their packages, led to upgraded forecasts.
Analysts say Orange is France Telecom's cash cow and that the debt-laden state firm would benefit from taking 100% control of its mobile subsidiary.
France Telecom ran up some of the heaviest debts in the telecoms industry during an aggressive acquisition spree which included the purchase of Orange.
Following the telecoms slump it has gradually been chipping away at its debt mountain and returning to a more realistic balance sheet.
Net debt totalled 49.3bn euros at the end of June, down by 18.7bn from the end of last year.
France Telecom's first half results are also greatly improved over the previous year.
The group's net profit rose to 2.5bn euros in the first six months of the year, compared to a loss of 12.2bn euros a year earlier.