Hong Kong's PCCW Group said Monday it is ending its bid to take a 49 percent stake in Orange's Dailymotion, citing the French government's preference for a European partner for the French video-sharing platform.
"The desire of the French government to encourage the search for a European solution discourages participation of international companies," PCCW said in a statement explaining its decision.
Orange has owned Dailymotion -- a rival of YouTube -- since 2012 and has been looking for a partner who would be able to fund its growth and ensure its development outside Europe.
France owns a 24.9 percent stake in Orange and Economy Minister Emmanuel Macron asked the company not to enter into exclusive talks with Hong Kong based IT company PCCW before talking to all interested parties, with the idea of finding a European solution.
Orange said it was "not in exclusive talks with anyone", but added that it was not opposed to having "a strategic partner to support and accelerate the development of Dailymotion."
PCCW is owned by Hong Kong tycoon Li Ka-shing's son Richard Li.
Li Ka-shing's Hutchison Whampoa bought British telecom giant O2 last month for $15.2 billion (13.8 billion euros), a move that expanded the tycoon's holdings in the international telecoms industry.
A source with knowledge of the Dailymotion talks said that it was now left to the French holding company Fimalac to make an offer for Dailymotion.
French newspaper Le Monde reported on Monday that the French media group Vivendi has made an offer of 250 million euros ($275 million) to buy out "almost all" of Dailymotion.
This offer negotiated by Orange's executive board will be presented and debated on Tuesday at a special board meeting, added Le Monde.
The German groups Axel Springer and Bertelsmann have also been mentioned.
This is not the first time the French government has been involved in talks over Dailymotion.
In 2013 France's then industrial renewal minister, Arnaud Montebourg, blocked a bid by Yahoo! of the United States to acquire Dailymotion, then valued at $300 million.
Dailymotion, a start-up launched in 2005, receives 128 million unique visitors per month, most of them from Europe.
The site is available in 18 languages with a strong presence in Turkey and Asia in particular.
It has yet make a profit, and only 10 percent of its revenue comes from France.