South Africa's state pension fund Public Investment Corporation, which is mobile group MTN's biggest shareholder, said on Tuesday that it supports revived merger talks with India's Bharti Airtel in principle, but believes there is "room for improvement" on the price.

PIC has also said it was undecided on whether to vote for the initial proposed $23-billion cash and share swap with Bharti, thereby putting pressure on the latter to sweeten its offer.

Brian Molefe, chief executive of PIC, told the western media, "Because of the strategic imperative, yes we will support the deal, but it depends on how they are going to negotiate, how the final details are going to look." These were Molefe's first public comments since talks restarted.

MTN, Africa's biggest mobile operator and Bharti, India's leading cellular firm, said last week they had restarted talks aimed at creating the world's third largest wireless group with more than 200 million subscribers and combined revenues of $20 billion.

They are discussing a swap deal that would leave Bharti with 49 per cent of MTN, while the South African company and its shareholders would get 36 per cent of Bharti. That could lead to a full merger of the companies, which have a combined market value of about $60 billion.

PIC holds about 21 per cent of MTN after a recent black economic empowerment deal, so winning its support will be crucial for the companies. Several smaller MTN investors have said Bharti needs to sweeten its offer, although Lebanon's Mikati family - which holds about 10 per cent - has already supported the transaction.

The companies would need approval from at least 75 per cent of MTN shareholders for a tie-up. Bharti Airtel chairman Sunil Mittal told CNBC TV18 in an interview prior to Molefe's comments that he expects the proposed merger to be supported, saying MTN would look after generating backing from its investors.

Several South African fund managers have said they will vote against the deal because the roughly 13 per cent premium Bharti is paying is too low for effective control of MTN, which is doing well on its own and doesn't really need Bharti funds.

PIC said that as well as price, it would also base a decision on whether to support a firm offer on how much influence over a merged entity MTN would retain. "One of the things will be important for PIC will be MTN having influence on Bharti," Molefe added.

A previous round of talks between the companies broke down over who would control a merged entity.

Meanwhile, Bharti Airtel chairman Sunil Mittal on Tuesday said Airtel would look at the Indian requirements for the deal and added that it was up to MTN to garner support from shareholders in South Africa. He also said he was confident that the proposed deal structure, which has been jointly thought and created between MTN and Bharti, would be supported by all stake holders.

According to Mittal, Bharti has already tied up the funding-related issues as there was large interest from the banking community to support the deal. Mittal also said if the deal were to go through, it would comply with all regulations from both countries.