China Mobile and Norway’s Telenor are reportedly in talks regarding a merger of their respective mobile networks in Pakistan. According to a report in local newspaper, Dawn, both operators have denied the story, but sources said that negotiations were being held secretly at group level. According to Wireless Intelligence data, Telenor is the second-largest player in Pakistan with 20 million connections in 1Q09 while China Mobile’s local unit, known as ‘Zong,’ is the fifth-based player with 6 million connections. A merger would create a formidable number-two player to market-leader Orascom, which had 28.2 million connections in 1Q09. Telenor is reportedly considering selling its management shares in its Pakistani unit due to security issues.

The report claims that China Mobile had previously tried to merge Zong – its only business to date outside of China – with Pakistan’s fourth-placed operator, Warid Telecom, but the two reportedly failed to agree on price. The country’s five main mobile operators are said to be keen on consolidation in the market and the local regulator, PTA, has also said that the market could be reduced to four players by next year.