An Atos Origin official on Tuesday declined to comment on reports that the Paris IT services company is in merger talks with Deutsche Telekom's T-Systems unit. "We've seen the reports but we're not saying anything at this time," the spokesman says.

The German newspaper Handelsblatt last week reported that T-Systems is looking to acquire Atos Origin, which holds the contract to implement IT systems for the Beijing Olympic Games. Officials at T-Systems weren't immediately available to comment.

While talk about the merger is purely speculative, one analyst thinks such a move would make sense. Both Atos Origin and T-Systems have strong European outsourcing practices, but neither is large enough to compete consistently against global companies such as IBM or EDS for worldwide contracts. "Success in outsourcing is often about scale, and combining the two firms would give them that scale," says Katherina Grimme, an analyst at Ovum Research.

Atos Origin recently won a $100 million deal to provide IT services to Premiere, the leading pay-TV operator in Germany and Austria. ADP Telecom, an operator of Wi-Fi hot-spots in France, recently tapped T-Systems for support services.