The core group looking at the best options for State-owned telecom majors Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd is in favour of a merger. The group will submit its final report to the ministry of communication in a few weeks.

"The proposal to merge the two public sector firms is alive, and we will give our report to the ministry soon. We are convinced that there has to be some sort of a merger of the two companies in order to benefit the customers, the government, the shareholders, the employees and the company," senior government officials said.

Earlier, seven global consultants gave their approval for a merger of the two companies.

While the group is yet to finalise the route for the merger, sources said the options included MTNL acquiring BSNL's assets in a phased manner, MTNL merging into BSNL or vice versa, MTNL acquiring a controlling stake in BSNL and a combination and variations of these.

The proposal to merge the two firms was mooted by Communications Minister Pramod Mahajan in order to take on the threat from the private sector operators. Mahajan had said the division of companies based on geography was incorrect.

While MTNL has not been allowed to expand its operations beyond Delhi and Mumbai, BSNL has been prevented from entering international long-distance services.