Dixons and Carphone Warehouse confirm discussions are taking place on a possible merger between the two companies-- one creating a mega CE retailer worth around £3.5 billion.
However a press release insists "discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming."
Carphone Warehouse is the biggest of the two retailers, with a market capitalisation of £1.8bn and around 2000 stores in 7 countries. Dixons is valued at £1.7bn and has 1154 stores spread across 12 countries.
Combined the two retailers' annual sales total nearly £12n.
"In a world of connected devices, Dixons is underexposed to the key area of mobile/smartphone retailing, and it is known that they were looking at the area," retail analyst Nick Bubb tells the BBC. "It is a bold move for Dixons-- it is slightly harder at this stage to see what's in it for CPW."
The British Takeover Panel demands the two retailers have until 24 March 2014 to announce whether the merger is taking place.