India's Bharti Airtel is reportedly in talks with Malaysia-based Axiata Group to merge their respective mobile units in Sri Lanka.
Negotiations are underway regarding a potential deal, the Economic Timesreported, citing two people familiar with the deal.
The potential merger would create the largest mobile operator in Sri Lanka with over 12 million customers.
According to the sources, it would follow a similar structure to the recently announced merger between Airtel Bangladesh and Axiata Group's Bangladeshi subsidiary Robi Axiata.
Under this deal, Axiata is set to own a 68.3% stake of the combined Bangladeshi company, with Bharti Airtel owning 25% and existing shareholder NTT DoCoMo hanging on to a 6.7% stake.
Dialog Axiata is already the market leader in Bangladesh with control over more than half of the mobile market, and the combination with fourth-ranked Airtel Lanka would put it in an even stronger position.
But this means the Competition Commission of Sri Lanka may object to the deal on antitrust grounds.
Airtel is reportedly exploring the deal because Sri Lanka's floor price on mobile tariffs has left the company unable to effectively compete on price and raise its market share.