Axiata Group and PT Sinar Mas Group are reportedly going ahead with plans to merge their Indonesian telcos.

As detailed by Bloomberg last week, a potential deal is set to create an entity worth $3.5 billion.

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Bloomberg reports that the owners of the two telcos, PT XL Axiata and PT Smartfren Telecom, are in talks over a structure for the deal, which could include a mix of cash and shares.

Both companies are carrying out due diligence, while a non-binding agreement could be reached in the coming months.

If the deal were to go ahead it would represent more market consolidation in the country, following the merger of CK Hutchison Holdings Ltd. and Qatar’s Ooredoo to create Indosat Ooredoo Hutchison.

Malaysian-based XL Axiata has close to 60 million subscribers in Indonesia. PT Smartfren Telecom has an estimated subscriber base of 36 million.

Axiata's Sri Lankan unit, Dialog Axiata, recently finalized an agreement to snap up Bharti Airtel's business unit in Sri Lanka.

Earlier this month, Axiata also confirmed it will sell its entire stake in its subsidiary Edotco Myanmar Ltd for $150 million.