The Tatas have informally agreed to pick up a 5-10 per cent stake in STAR News.

STAR group chief executive and chairman James Murdoch had sounded out the Tatas on this some months ago and the latter had agreed to the offer, sources close to the development said.

STAR News has to dilute its foreign equity stake to 26 per cent by June 26 in line with the government's guidelines on news channels uplinking from India.

In March, the ministry had said any news channel uplinking from India could not have more than a 26 per cent foreign equity holding and its senior management must be Indian.

A STAR India spokesman did not want to comment on the issue. If the Tatas acquire a stake in STAR News, it will be part of a broader deal.

Murdoch and the Tatas had been exploring the possibility of a partnership for "delivering digits to the home", the sources said.

Contrary to media reports suggesting that the two sides were in talks to set up a direct-to-home service, the fundamental idea was to offer a host of services through fibre optic lines, including telephone services, cable TV services and the Internet, they added.

Like all telecommunication companies, Tata Teleservices wanted to tap the corporate and home market by offering data services among other things through broadband, the source said. "We've decided to be in the telecommunication sector, or the digital world," he said.

Murdoch already has BSkyB, which is a DTH platform in the UK. "But what we're looking at is not just content," the source said. According to the source, though Murdoch met Tata Group Chairman Ratan Tata in December 2002 and other senior Tata group executives subsequently, no deal was on the table as yet.

"Talks are still exploratory. They may result in a joint venture, not with Tata Teleservices, but with the Tata group," he added.

However, Vaishnavi, the public relations firm handling the Tata group account, said the STAR proposal was one among the numerous business proposals the group studies on a continuous basis. "It is at a very preliminary stage," a Vaishnavi executive said. Murdoch did not respond to a request for comments.

Apart from talking to the Tatas, STAR is also exploring the possibility of splitting its news channel into smaller companies — one for providing content and another for technical services — with employees holding the majority stake.

The STAR spokesman refused to comment on the restructuring exercise. However, the business development team lead by Kausak Dalal is learned to be working on several proposals to dilute the channel's foreign equity.