France Telecom's (FTE) Orange Tuesday said it had started exclusive talks to acquire a 49% stake in French video-sharing website Dailymotion for EUR58.8 million, as part of its new chief executive's strategy to team up with content providers to attract new clients and find alternative sources of revenue.

"This operation once again illustrates the role that Orange intends to play in the content value chain. Although we are no longer publishers ourselves, we are strengthening our position in the fields of aggregation and distribution," said Chief Executive Stephane Richard, who joined the company in March last year.

The news of the exclusive talks with Dailymotion comes less than a week after France Telecom said it will form a joint venture with Canal Plus Groupe, a unit of Vivendi SA (VIV.FR), to merge its cinema channels with Canal Plus's movie channel TPS Star.

The group recently also joined forces with music downloading site Deezer as well as with members of the French press to create an online news kiosk, all part of an effort to offer clients better deals at a time when data traffic on the Internet is exploding, mainly due to consumers watching more and more videos on social networks.

The French telecoms group said it will set up a separate but wholly-owned unit to regroup all its new content activities under one helm.

In the future, France Telecom could consider offering clients packages that combine content from Dailymotion and Deezer for example, CEO Richard said at a press conference in Paris.

The deal with Dailymotion, the world's second-largest online video site, will help France Telecom meet the sharp rise in customer's video consumption across various platforms, including 3G, wifi and Internet.

"The capacity to manage the traffic and quality of videos will become essential. Around two thirds of our networks will be used up by video traffic, it's the channel of the future," said Paul-François Fournier, executive director at France Telecom in charge of audience and advertising.

Richard said the deal values Dailymotion at EUR120 million, noting that the price of the transaction was "very reasonable."

The agreement should allow Orange to gradually increase its shareholding in Dailymotion to 100% from 2013, and should allow for the integration of new business partners, the company said.

France Telecom is open to other partners joining its alliance with Dailymotion, Richard said.

"We could have an American partner that helps Dailymotion develop in the U.S.," Fournier added, speaking on the sidelines of the conference.

Investment fund Advent Venture Partners said it will keep a "significant stake" in Dailymotion. "We will remain on the board of the company and help the business to continue on its strong growth path," general partner Peter Baines said in an emailed statement.

French sovereign fund, Fonds Strategique d'Investissement, which invested in Dailymotion in 2009 to support its global expansion, said the deal with France Telecom will help Dailymotion reach more clients via different platforms, including mobile and tablets.

France Telecom said a final agreement with Dailymotion is expected in the coming months.

- By Ruth Bender, Thomas Varela, and Geraldine Amiel, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@dowjones.com