Vodacom is the South African unit of Vodafone Group Plc. Tata Communications owns more than 60 per cent of Neotel, a provider of fixed-line service and data.
The talks are set to become exclusive, Bloomberg said.
Neotel was not immediately available for comment and Vodacom declined to comment.
"It is not our policy to comment on market speculation," a Tata Communications Ltd spokeswoman in Mumbai said.
Reports of discussions to sell the firm have been swirling for most of this year and Vodacom's bigger rival, MTN, confirmed in August that it was no longer in talks for a stake in Neotel.