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(Recasts with Idea denying talks)
By Devidutta Tripathy and Abhirup Roy
MUMBAI, Aug 23 (Reuters) - India's No. 3 mobile phonecarrier, Idea Cellular, strongly denied a news reporton Tuesday that it was in exploratory talks about a merger withlarger rival Vodafone India.
A spokeswoman for Idea's parent, conglomerate Aditya Birla,called the CNBC TV18 report of talks between Idea and Vodafone"baseless and absolutely false".
"This is absolutely untrue and preposterous," she said in anemail. "There is no such intent."
Shares in Idea closed 6.9 percent higher on Tuesday afterthe TV channel said the two sides were in talks, citing unnamedsources.
A spokesman for Vodafone India, India's No. 2 operator bymarket share and the local arm of Britain's Vodafone Group Plc, declined to comment on the report.
India is the world's second-biggest mobile phone market bysubscriptions, behind China, but high competition in the crowdedmarket has kept profits under pressure.
Adding to the competition, Reliance Jio - a telecom venturebacked by India's richest man Mukesh Ambani - is set to launchcommercial operations in the coming months.
"Both of them are struggling with their data revenue marketshare and ahead of a big competitive change in the industry theymight want to get bigger," IDFC securities analyst AbhishekGupta said of Idea and Vodafone India.
Any such deal would also face tough regulatory scrutiny andanalysts say approvals would be unlikely, as the companies wouldbreach the 50 percent revenue market share limit in many regionsof the country if they did try to merge.
"It's very unlikely," PhillipCapital (India) analyst NaveenKulkarni said, citing the regulatory hurdles.
"I'm doubtful whether this can go through but there could besome other form of merger, such as spectrum-sharing deals," headded. (Reporting by Devidutta Tripathy and Abhirup Roy; Editing byEuan Rocha and Susan Fenton)
