Bell Atlantic confirmed that it was in discussions with Vodafone about a "US business relationship".

BBC New York Business Correspondent Patrick O'Connell looks at a merger which could creat a giant

Reports suggest the two companies will merge their US mobile phone businesses to create a company worth between $70bn and $80bn (£44bn - £50bn), owned 55% by Bell and 45% by Vodafone, which would be floated on the stock market.

The new company would have nearly 25m customers across the United States. It would combine the East Coast operations of Bell Atlantic Mobile, which stretch from Maine to Georgia including some of the biggest metropolitan areas, with Airtouch's mainly West Coast based operations.

Bell is also expanding its mobile operations by buying long distance operator GTE for $52.9bn.

Analysts also the two groups had been under pressure to gain a nationwide footprint, resist competitive pressures and boost subscriber growth.

Surprising alliance

The alliance would bring together long-standing rivals in the US mobile phone market.

Bell had originally planned to buy Airtouch in January, but Vodafone's superior offer of $60bn won instead.

At that time Ivan Seidenberg said that "it is our job to prove that we would have been the better proposition." Bell end a partnership agreement with Vodafone in April.

Vodafone Airtouch, which is the UK's largest mobile operator, is keen to expand its overseas opeations, and wants to increase the reach of its mobile phone operations in the US.

Chris Gent, the company's chief executive, has made frequent trips to the United States and has met Mr Seidenberg.

But a Vodafone spokesman was cautious about the possibility of the link-up.

"Doing something in the States is a clear option and it is something we want to do. But it is not a 'drop dead we have to do it now' scenario," he said.

Vodafone is reportedly asking for a rapid stock market flotation in order that it could more easily withdraw if relationships turn sour.

The deal would speed the creation of a national mobile phone network in the United States, where the market is highly fragmented, competing with national telephone companies like AT&T and Sprint.

Vodafone Airtouch, which already has more than half its customers outside the UK, is now the third largest company on the UK stock market, and rang up a profit of nearly £1bn ($2.6bn) this year.

The shares rose nearly 2% on the London Stock Exchange after the news was confirmed, to reach £12.15, valuing the company at nearly £75bn ($120bn).