* Deal will help Telenor to gain a bigger foothold in India
* Tata may cut stake in combined firm, DoCoMo to retain
(Adds details, context)
By Sumeet Chatterjee and Devidutta Tripathy
MUMBAI/NEW DELHI, Nov 27 Norway's Telenor
is in talks to merge its Indian operations with Tata
Teleservices to gain a bigger foothold in the world's
second-biggest mobile phone market, a source with direct
knowledge of the situation said on Tuesday.
Telenor, which won rights to operate in six Indian zones in
an auction this month after its earlier permits were ordered to
be revoked, is looking to take a majority stake in the merged
entity, the source said.
The deal will see India's Tata Group cutting its stake in
unlisted Tata Teleservices, the country's No. 6
mobile phone carrier, said the source, declining to be named due
to the sensitivity of the matter.
The merged entity will be ranked No. 5 by customers.
Japan's NTT DoCoMo, which owns a 26 percent stake
in the company, will retain its holding in the combined entity,
the source said.
Telenor and Tata Teleservices declined comment. NTT DoCoMo
could not immediately be reached for comment in Tokyo outside
their business hours.
With more than 900 million mobile phone customers, India's
mobile phone market is second only to China.
The crowded market, which boasted 15 players until the first
half of this year, is ripe for consolidation, analysts have
said, as competition and rising debt levels eat into profit
However, there have been few deals, mainly due to regulatory
uncertainty and strict government rules on ownership and airwave
A cabinet decision this month determined that companies
buying a carrier that paid a low state-set price for airwaves
must match a far higher price determined in a recent auction and
pay the difference to the government.
Singapore state investor Temasek owns about 7 percent of
Tata Teleservices, while Indian business man C. Sivasankaran
holds about 8 percent. It was not immediately clear if their
holdings would change if the deal goes through.
Telenor, which earlier operated in 13 Indian telecom zones,
will now be reduced to six zones with 34 million customers,
while Tata Teleservices has permits for all of India's 22 zones.
(Editing by Jason Neely)