Telefonica has offered €20 billion for Dutch telco KPN, according to the Wall Street Journal.

Talks so far have been preliminary, and both companies are assembling teams of advisers to prepare for negotiations, according to the newspaper. A deal between the two would probably need the approval of the Dutch government, which holds a 14 percent stake in KPN.

A deal would also cause the biggest shake-up in the European telco market for five years. It would join various businesses across Europe, combining traditional landline and mobile phone services with Internet and cable-TV access.

Telefonica and KPN have talked about a merger before. In 2000, merger talks between the two telecommunications companies fell apart after Telefonica shareholders and Spanish government officials expressed concern over the Dutch government's stake in KPN, which at the time was 43.5 percent.