Norway-based telecom giant Telenor ASA is reportedly pursuing discussions with Tata Teleservices Ltd to merge their Indian operations.

Three people familiar with the situation revealed that Telenor and Tata Teleservices Ltd are mulling proposal to combine their operations in India, and create a bigger entity to better compete with rivals.

One of the three people, who were speaking on the condition of anonymity as the information was confidential, added that Japanese telecom firm NTT DoCoMo, which holds a 26% stake in Tata Teleservices Ltd, would likely retain a stake in the combined entity also.

India has so far remained a very challenging market for Telenor, and the reported merger could help the Norwegian telecom firm to gain a better position in the market.

Thomas Nielsen, an analyst with Oslo-based Pareto Securities ASA, said, "Some type of merger there would help, if it's allowed, as they could utilize their size to get a better position in the market."

However, people with direct knowledge of the matter added that any merger would depend on new takeover rules that are currently being mulled over by the Telecom Regulatory Authority of India (TRAI).

While both Tata Teleservices and Telenor declined to comment on the report, NTT DoCoMo Spokesperson Junpei Toya said they would maintain their stake for the time being. However, Toya too refused to comment on the prospect of Telenor's merger with Tata Teleservices.