Norwegian carrier Telenor is said to be in talks to merge its Indian operations with Tata Teleservices to increase its foothold in India's mobile phone market.
A source with direct knowledge of the matter also said Telenor wants to have a majority stake in the merged entity, which would become the no. 5 mobile carrier in India based on customers, Reuters reported Tuesday.
The source told Reuters that as a result Tata Group will cut its stake in Tata Teleservices, currently ranked six in the country. Japan's NTT Docomo, which owns a 26 percent stake in Tata Teleservices, will remain a shareholder in the new entity.
India's mobile phone market has over 900 million customers, and is second only to China. Analyst have also said the tough competition and increasing debt levels are eating into operators' profit margins, making the market ripe for consolidation, Reuters noted.
However, regulatory uncertainty and strict government rules on ownership and airwave licenses have meant few deals have been inked, the report said.
Telenor won licenses for six Indian telecom zones in the 2G spectrum auction held earlier this month. It lost its previous licenses when the Indian Supreme Court had revoked all 122 licenses from various telcos in February over allegations of government fraud.
Earlier in July, Telenor announced it will slash 2,000 jobs in India to cut costs and reallocate resources to more profitable regions in the country.
Telenor's decision to merge with Tata Teleservices comes after its dispute with India's Unitech, with which it formed a mobile operator joint venture (JV), called Uninor. However, the JV lost its 2G licenses as part of an industry-wide corruption probe, leading to Telenor's decision to break up the partnership and auction Uninor's assets despite Unitech's disapproval.