PARIS, June 9, 2008 (AFP) - Iliad, the parent group of French Internet service provider Free said on Monday that it was in exclusive talks with Telecommunication Italia to buy its Internet business Alice.

Iliad said it was prepared to pay up to 800 million euros (1.26 billion dollars), to become the second-biggest provider in France after Orange, overtaking Neuf Cegetel.

Iliad said the purchase price would value Alice at 800 million euros, but that it could be considerably less after 'adjustment'.

Telecommunication Italia said in November that it was considering withdrawing from the French broadband Internet market.

Neuf Cegetel and cable-service operator Numericable have also expressed interest in Alice which says it has 900,000 subscribers, and is the last small provider in France following a spate of takeovers.

Neuf Cegetal has grown largely by acqusition, of AOL and Club Internet for example, Until now, Free, a pioneer in the French market, had grown mainly by internal development.