Sources said Packer is likely to pick up an equity stake of between five to 10 per cent in HFCL or set up a new joint venture. HFCL chairman Mahendra Nahata, when contacted, refused to comment on the proposed alliance between the two groups.

An alliance between Packer and HFCL makes logical sense as the latter on Monday announced in Chennai, the launch of television set top boxes for direct-to-home services. This sector is likely to be opened up by the government soon.

Sources said that HFCL was set on tapping the "convergence" wave in a major way, as it has the right combination of manufacturing strength in telecom equipment, a strong R&D base, a basic telephone services project in Punjab and cellular experience by way of a stake in Gujarat mobile phone operator Fascel.

An alliance with Channel 9 will make immennse sense for HFCL, as it will provide the company with an entry into the entertainment content and access business. The company is now expected to enter into the internet access market in a big way, as the Essar project had envisaged major investments in a fibre optic backbone in Punjab for Internet and other broadband applications.