UPDATE 1-Telefonica in talks to buy KPN's German business
* Telefonica, KPN boards meet Monday to approve deal-source
* Business valued at 5 bln euros - source
MADRID, July 22 (Reuters) - Spain's Telefonica is in talks to buy KPN's business in Germany and the two companies could approve a deal as early as Monday, a source with knowledge of the situation said.
Both telecom companies have roughly the same size on the German market and a merger would help them vie with bigger competitors Deutsche Telekom and Vodafone.
The source said the boards of KPN and Telefonica would meet on Monday and were expected to approve a deal that would value KPN's E-Plus at 5 billion euros ($6.57 billion).
In a brief statement, KPN confirmed it was in talks to sell the German business but did not name the potential buyer.
"At this stage the outcome is not yet clear. Further announcements will be made, if and when appropriate," it said.
The talks were first reported by the Financial Times.
KPN and Telefonica have discussed a tie-up in the past but those talks fell apart at the last minute because of valuation.
Dutch company KPN also tried to sell E-Plus last year to ward off an unsolicited approach by a Mexican tycoon, the world's richest man Carlos Slim. The company failed to attract a buyer or merger partner and Slim's America Movil now holds close to 30 percent of KPN.
America Movil competes head-to-head with Telefonica, which is present across Latin America. Telefonica listed part of its German unit O2 Deutschland last year in a drive to cut debt and raise cash as its home market of Spain lags.
A spokeswoman for America Movil did not immediately comment on the report, while a spokesman for E-Plus declined to comment.