Vodafone has confirmed its Indian unit is in discussions to merge with Idea Cellular, a deal that would create the Asian country's biggest telecoms firm.
In an unscheduled announcement, the telecoms giant said talks are under way with Idea's owner, the Indian conglomerate Aditya Birla Group, about an all share merger.
"Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India (excluding Vodafone's 42% stake in Indus Towers) and Idea.
"There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction," Vodafone said.
Vodafone's shares rose 3.28% to 199.7p on the news, with the firm rising to the top of the FTSE 100.
Neil Wilson, senior market analyst at ETX Capital, said: "We have no more details than that but it seems Vodafone is taking the Indian tiger by the scruff.
"India has become a trouble-spot for Vodafone, with losses there severely hurting the rest of the group.
"Vodafone recently posted a whopping five billion euro write-down from 'increased competition' in India.
"This was down to a 14% drop in data prices, caused by free promotional offers from Reliance Jio as it shakes up the market by offering almost free data.
"The Idea tie-up looks like a way to limit the casualties on either side.
"A merger could help the combined group maintain higher prices and take on the likes of Reliance Jio.
"Something had to be done and this merger might be the way to strengthen Vodafone's hand in the Indian price war."