FRANKFURT/LONDON (Reuters) - Vodafone was discussing a bid of about $10 billion with Germany's No. 1 cable operator Kabel Deutschland and was confident its raised all-cash offer and absence of antitrust issues put it in a better position than rival Liberty Global, two sources familiar with its thinking said on Wednesday.

Liberty Global , which owns Unity Media, Germany's No. 2 cable operator, made an 85-euros-a-share offer on Tuesday, two people familiar with the matter said, just days after sources said Vodafone had offered 81-82 euros a share or 7.2 billion euros ($9.6 billion) in cash.

Vodafone is now mulling an offer of about 85-86 euros a share, or at least 7.5 billion euros, a separate source close to the company told Reuters on Wednesday.

The British mobile operator had considered raising its initial offer before Liberty Global joined the bidding race, one source close to the matter said last week.

Vodafone wants to buy the cable company so that it can offer television, fixed line and broadband services to more of its mobile customers, while Liberty Global wants more consolidation in one of its best performing markets.

"Vodafone has told Kabel Deutschland they are working on an improved bid. There is still nothing concrete on the table," said one of the sources familiar Vodafone's thinking.

A third source said Vodafone was confident its offer would succeed as it has less risk and is all in cash.

"Kabel Deutschland shareholders are not keen to accept the risks of an offer which includes a share portion and the risk of waiting 9-12 months on regulatory approval," the person said.

A Liberty Global deal would be closely scrutinized by German monopoly watchdog. Germany's competition regulator in February blocked Kabel Deutschland's bid to take over smaller Berlin-based cable group Telecolumbus for 618 million euros.

Vodafone declined to comment and no one at Kabel Deutschland was immediately available to comment.

Kabel Deutschland shares were trading 0.5 percent higher at 85.90 euros by 6 a.m. ET, after hitting a high of 86.31 which values the group's equity at 7.6 billion euros.

(Reporting by Alexander Huebner and Harro ten Wolde in Frankfurt, and Sophie Sassard and Paul Sandle in London; Editing by Louise Ireland)

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