BT's fixed-line network is its main asset
Both WestLB and BT declined to comment on the report, which said the proposed deal included £5bn in cash payment, with most of the transaction financed by borrowings.
The newspaper said West LB approached BT two months ago, and quoted an insider as saying: "We have laid down our marker with BT.
"At the moment the fixed-line business is not clearly defined in terms of value, but we have sought to have first refusal on a deal."
Robin Pauley, BT's director of communications, told the newspaper: "We get approaches all the time. Some are good, some are loopy."
The rumoured bid comes only days after Earthlease, another bank-led consortium, said it was in talks with regulator Oftel over an £8bn bid for BT's "local loop" - the last mile or so of wire between telephone exchanges and homes.
BT has turned down Earthlease's offer, saying its local loop assets are not for sale.
Wireless worries
Separately, the Sunday Times said one of BT's large shareholders had said the company needed to reconsider its plan to demerge BT Wireless, as important synergies between the fixed and mobile units could be lost.
It said senior BT figures believed that BT chairman Sir Christopher Bland needed to rethink the plan because the company's financial position had improved.
Heavy investment in mobile phone licences saw BT's debt balloon to nearly £28bn earlier in the year, but the firm's latest set of results showed that the debt position has improved dramatically.
But BT shares have fallen by two-thirds over the last year as the telecoms sector has fallen victim to the global economic downturn, and investors lost confidence in management's ability to turn the firm around.