Telenor, the parent company of Indian operator Uninor, is in talks to acquire a majority stake in Videocon Telecom. But Videocon has Rs 500-crore liability towards the government, which the telecom department wants from the Videocon group company, needs to be resolved before any deal is sealed, Reports ET, (Economic Times), citing an unnamed person familiar with the matter.

"A combination is a win-win for both. Videocon wants to exit the business and Uninor needs to expand in the market to stay relevant", source said.

"Since both are relatively small and both have liberalised spectrum, they won't have a problem with existing M&A rules. They don't need to bother about the spectrum caps as well."

Videocon values itself at around 100 billion rupees (€1.37 billion) including debt, sources said.

Videocon's CEO Arvind Bali confirmed his company is in discussions with international companies regarding a stake sale, but did not comment further, the paper said. There has been no comment from Telenor.

Merger would help Uninor to boost its market share, although the combined company would remain India's eighth largest mobile operator as well.

ET, (The Economic Times, India's largest Economic daily)