Neustar Inc, a company which helps North American telecommunication carriers route calls and text messages, is considering a potential sale amid interest from private equity firms, according to people familiar with the matter.

No formal sale process is currently underway but Neustar is working with investment bank JPMorgan Chase & Co as it reviews possible options following a more than 40 percent drop in its share price year-to-date, the people said this week.

Neustar shares were trading up 10 percent on the news at $31.5 in afternoon trading in New York.

Much of Neustar's woes stem from a major government contract it stands to lose to Ericsson AB subsidiary Telcordia Technologies. A sale process may not start until the winner of that contract has been finalized, the people said.

Some buyout firms have already expressed interest in a leveraged buyout of Neustar, which has a market value of $1.8 billion, and would consider buying it even without that contract, the people added.

The sources cautioned that Neustar may decide against a sale and asked not to be identified because the deliberations are private. Neustar and JPMorgan declined to comment.

Since 1997, Neustar has managed the world's largest local number portability registry in the world that allows customers to transfer phone numbers among different carriers, serving more than 2,000 telecom carriers in the U.S. and Canada. This exclusive government contract, which expires in 2015, accounts for about half of Neustar's revenues.

A federal advisory committee has recommended that the U.S. Federal Communications Commission award the new contract to Telcordia.

Neustar counters that Ericsson shouldn't be given the contract because its relationships with telecoms carriers prevent it from administering the database in a neutral way and it may not be able to keep it safe. Ericsson disputes this.

Going private could allow Neustar to restructure its operations, should it lose the government contract, without having to worry about its share price performance. It is a route that computer maker Dell Inc chose last year when its founder partnered with buyout firm Silver Lake Partners LP to take it private.

At an Oppenheimer industry conference last week, Neustar Chief Financial Officer Paul Lalljie said he had no exact timeline for when the contract will be awarded.

"We definitely don't have to go anywhere for capital. Even with or without this business, we are cash flow positive," he said.

Neustar is a Sterling, Virginia-based company created by private equity firm Warburg Pincus LLC, which carved it out of Lockheed Martin Corp in 1999 and took it public in 2005. Warburg, together with Providence Equity Partners LLC, also sold Telcordia to Ericsson in 2012.

Other private equity firms have also shown strong interest in companies serving telecom carriers in the last few years. Carlyle Group LP, for example, took Syniverse Technologies LLC, a provider of voice and data services for telecommunications operators, private in 2011 for $2.6 billion.