Telenor, which won rights to operate in six Indian zones in an auction earlier 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 Telservices, the country's No. 6 mobile phone carrier, said the source, declining to be named due to the sensitivity of the matter.
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 be immediately reached for a comment in Tokyo outside their business hours.