Telecoms giant BT has stepped up its efforts to acquire mobile broadband provider EE.
The company has entered into an exclusivity agreement with Deutsche Telekom and Orange in relation to a possible £12.5 billion deal.
This period will last several weeks, during which BT will not discuss potential acquisitions with any other broadband operator.
The company had also been in discussions with O2 over a possible purchase, but talks with the Telefonica-owned operator will now cease.
The next few weeks will see BT complete its due diligence and work towards a definitive agreement to purchase EE, which is the UK's largest 4G mobile broadband provider.
Acquiring EE would allow BT to accelerate its existing mobility strategy.
The firm is desperate to offer mobile services along with fixed-line broadband, home phone and pay-TV as part of quad-play bundles.
And should it take over Britain's most advanced 4G network, BT will have greater control in terms of future investment and product innovation.
Deutsche Telekom and Orange currently own a 50 per cent share in EE, the broadband provider they formed in 2010 as a merger of their respective UK operations.
In the event of a sale to BT, Deutsche Telekom - owner of the T-Mobile brand - would take a 12 per cent stake in BT and would be entitled to appoint one member to the company board.
Orange would hold four per cent of shares in the BT Group should a deal be agreed
According to BT, the acquisition of EE would create "significant synergies," mainly through network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs.
In addition, the firm expects to generate additional revenue by selling fixed-line services to customers who do not currently take a service from BT.
"The exclusivity agreement does not require the parties to enter into a transaction and there can be no assurances that one will occur," BT explained.
"If a transaction is agreed, approval by BT’s shareholders will be required as a condition of the purchase."
Ofcom, the communications regulator, will also be required to give the green light.
A merger between the UK's largest fixed-line and 4G mobile broadband providers is likely to raise competition concerns in some quarters, although it is thought unlikely the deal will be blocked.
However, it is possible that BT would be required to divest some of its spectrum assets to other mobile operators.