SingTel, the biggest company on the Singapore stock exchange, said in a statement late on Monday that it was holding talks on the merger with Britain's Cable and Wireless Plc, the 54 per cent owner of the dominant Hong Kong phone company."If the discussions are successful, the merger of equals will be the second largest full service telecom provider in Asia," SingTel spokesman Lim Seng Jin said on Tuesday.

Japan's Nippon Telegraph and Telephone (NTT) is the top Asian telecom firm with a market capitalisation of $233 billion.

SingTel company secretary Chan Su Shan said in the statement that if successfully concluded, the talks would lead to a proposed "merger of equals."

"These talks are at a stage where there can be no certainty about their outcome."However, in the event that any proposal is made, it is likely to reflect market values of SingTel and C&W HKT for recent periods," Chan said in the statement.SingTel's market capitalisation as at Monday's closing prices was $26.25 billion while C&W HKT had a market value of $29.79 billion.

The disclosure of the merger talks came three days after the Singapore government announced that the island state's telecommunication sector will be fully opened up in April.