Hathway, the sources said, also plans to dilute an additional 10 per cent to financial institutions. If the deal sails through, Star TV will get access to a quality cable TV network, helping it push its Internet products via broadband. Besides, it will also give Rupert Murdoch's Star TV arm leeway to take on rival Zee Network in content and distribution.

"After Subhash Chandra bought out News Corp in three local joint ventures, which included SitiCable, Murdoch did not have a cable-delivery network. Ground distribution would be an important handle for Star TV to expand into the Internet and broadband delivery, besides providing a sound platform for distributing its group of channels," a media analyst said.

With Intel picking up a stake in the Hinduja-owned INCablenet, and SitiCable eyeing a 6 per cent dilution to an investor, Hathway needed the funding and strategic support of a leading player. "The giants are getting into the field of cable distribution. In the pay-TV environment, Hathway needed a partner," said the analyst.

Hathway was facing severe threat from Sun TV in Chennai. It's market share was dwindling fast, before it struck a truce with Sun Network on the territorial distribution of their operations. Besides, it has plans of upgrading the network, for which it needs funds infusion.

Hathway is one of the leading multiple system operators (MSOs) in the country with a strong presence in Kerala. The network also has a significant and quality presence in Mumbai. It claims to reach out to 1.5 million cable homes spread across states like Tamil Nadu, Karnataka, and Andhra Pradesh.

Hathway, through UCN's acquisition, has a presence in the lucrative market of south Mumbai. It also acquired Bhawani Cable, a major network at Chembur in the central suburb of Mumbai. Hathway has formed a joint venture with Win Cable to gain a presence in the western suburbs of Mumbai. Through Win Cable, it is expanding in Delhi.

Star TV is also trying out another route to tap independent cable operators. It is willing to provide investments to upgrade cable networks, provided it is allowed to have an exclusive right to deliver data. The scheme, however, has found few takers.

"Hathway is the first cable network in the country to commercially introduce cable modems. Star is eyeing broadband delivery. Both have a synergy," the analyst said.