Spanish telecoms company Telefonica has offered Portugal Telecom more than 3 billion euros ($4.1 billion) to buy full control of their Brazilian mobile unit Vivo, the Financial Times reported.
Telefonica also does not rule out taking control of Telecom Italia , Italy's largest telecoms company, the newspaper reported.
Telefonica has told Portugal Telecom to respond to its offer by August, Telefonica Chairman Cesar Alierta told the newspaper in an interview.
If a deal goes ahead, Telefonica would be likely to sell the 10 percent it has in Portugal Telecom, the FT said.
Telefonica is part of a consortium led by Italian financial institutions planning to buy a controlling stake in Telecom Italia.
Alierta played down the prospect of Telefonica quickly seeking to buy out its partners in the consortium, highlighting how Italian politicians were keen for Telecom Italia to remain in domestic hands.
Alierta said he was mainly focusing on organic growth after a series of acquisitions in Europe and Latin America.
He predicted cross border consolidation of leading European telecoms groups, the newspaper reported.
Telefonica is seeking an "industrial partnership" with Telecom Italia and Alierta said the two companies could share mobile infrastructure in Brazil for Vivo and TIM Brasil.
The partnership would allow the companies to realize cost savings by teaming up to buy telecoms equipment such as phones, the newspaper said.
Alierta told the Financial Times Telefonica's decision to pay 2.3 billion euros for a 10 percent economic interest in Telecom Italia was also a defensive move after America Movil , the Latin American mobile phone group, also tried to buy the same stake from Pirelli.
That would have allowed America Movil to create Brazil's biggest mobile unit by merging its Claro unit with Tim Brasil, Telecom Italia's Brazilian mobile unit.
Alierta said Telefonica would not seek to merge Vivo, Brazil's largest mobile operator, with Tim Brasil, Telecom Italia's Brazilian mobile unit, because regulators could object.
He said Vivo's performance had suffered because of tensions in the joint venture between Telefonica and Portugal Telecom. He said the unit had lost ground in Brazil to Claro, which is owned by America Movil.
Getting full control of Vivo is Telefonica's top deal making priority, Alierta told the newspaper.
A Telefonica spokesman declined to comment on the newspaper report on Tuesday.