BERLIN -- If published reports are accurate,

France Telecom

(FTE)

is on the verge of acquiring the U.K.'s widely coveted mobile-phone operator

Orange

. Hold the fruit or color cliches -- the deal, if it goes through, could be a big boost for both companies.

When the British telecommunications company

Vodafone

(VOD) - Get Report

took over Germany's

Mannesmann

earlier this year, the entire European telco industry began salivating at the prospect the combined firm would have to unload Orange for competition reasons.

Often considered the most dynamic wireless operator in the U.K., Orange made itself that much more attractive to potential buyers when it nabbed one of the few very expensive U.K. licenses for third-generation mobile-phone services (also known as universal mobile telecommunications services, or UMTS) this spring. Now France Telecom is reportedly in exclusive talks with Vodafone to buy Orange for around $44 billion in cash and stock. Should the talks be successful, an agreement could be announced as early as next week, when Vodafone releases its full-year results on Tuesday.

The deal would simultaneously greatly strengthen France Telecom's pan-European ambitions, while providing Vodafone with more cash to continue scooping up pricey UMTS licenses across the continent.

Mutual funds such as the

(VEUAX) - Get Report

Chase Vista European Equity fund, which has sizable holdings in both companies, should ensure investors on both sides of the Atlantic remain focused on the outcome of the talks in the coming week, which will be shortened by holidays in the U.S. and U.K. On Friday, France Telecom closed up 5.90 euros, or 4.4%, at 141.80 ($129.30) in Paris; Vodafone finished down 5.75 pence, or 2%, at 281.25 ($4.20) in London. In New York, the ADRs of the two companies were up 7 3/4, or 6.3%, and 1/4, or 0.6%, respectively.

With France Telecom's recent purchase of a stake in Germany's

MobilCom

and their partnership to bid for a German UMTS license this summer, successfully acquiring Orange could secure France Telecom's position as a major European third-generation mobile player.

Although according to some observers the price tag for Orange likely won't come cheap for France Telecom, the short-term cost could be more than worth it. "It's the only operator left that allows you to get into mobile in the U.K.," says Sean Johnston, an analyst from

SG Securities

, in London. With that in mind, "they don't want this to go down to a bidding war, so I imagine when they do table an offer it's got to be such that it's going to be difficult for another party to get in." SG has had an investment banking relationship with France Telecom in the past.

To help it fund its bid, France Telecom has obtained a $29 billion loan and has recently announced its intention to liquidate its holding in both

Deutsche Telekom

(DT) - Get Report

and

Telefonos de Mexico

(TMX)

.

France Telecom will need to use all the cash it can lay its hands on because Orange's desirability will most certainly prompt interest from other quarters.

MCI WorldCom

(WCOM)

is thought to be considering a bid, as is

KPN

(KPN)

of the Netherlands, which is backed by Japan's

NTT DoCoMo

(NTT)

. How much Vodafone prefers France Telecom likely won't be know until it's a done deal.

Because Vodafone has to unload Orange regardless, a sale to such an eager party as France Telecom would be considerably more lucrative than a simple de-merger of the wireless unit. For investors, the extra cash should be welcome as it helps Vodafone manage its debt and fund its own buying as pricey UMTS auctions continue.

"I hope they sell

Orange really, really expensively and it helps pay for all the expensive licenses they're bidding for," jokes Rosemary Sagar, who manages the

(UMINX)

Excelsior International fund, which is down 18.6% year to date, but is up 27.5% over the past 12 months. Sagar likes Vodafone because "they are currently the only pan-European mobile play out there."

Even if France Telecom is lucky enough to acquire a rather pricey Orange, it won't yet be able to style itself as a pan-European wireless operator. It will, however, remain in the game.