By Gwénaëlle Barzic

PARIS (Reuters) - Alcatel-Lucent, which is cutting 10,000 jobs in an attempt to turn the company around, is close to winning a contract from a major domestic telecom operator, a source familiar with the matter said on Thursday.

The deal, involving "small cells" that improve mobile coverage, will likely be welcome news after the restructuring plans, which include 900 job cuts in France, were criticised by a government battling record levels of unemployment.

France's left-leaning industry minister, Arnaud Montebourg, called on the country's network providers to help Alcatel-Lucent by favouring its products over those of cheaper rivals.

"There will be news soon," the source said, adding that the company involved was a rival of Orange but did not wish to be identified as the contract was not yet official.

Alcatel-Lucent declined to comment.

Alcatel-Lucent signed a deal worth roughly $135 million in research spending with mobile chip maker Qualcomm in July to develop miniature base stations, known as small cells. Orange, formerly France Telecom, has also already developed a partnership in that area with Alcatel.

Telecom operators are increasingly layering these tiny base stations on to their networks to boost wireless coverage over a range of 10 to 200 metres.

Alcatel-Lucent boss Michel Combes said this week that the company's future was at risk and that the cuts were its last chance to stem years of losses and turn the company around.

(Editing by Marc Joanny and Patrick Lannin)

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