New World Mobile has been in talks with 3G licence holder CSL about co-operation which could lead to a merger, market sources said yesterday. An unsourced mobile text message about the talks sent to the local media on Monday caused shares of New World Mobile (NWM) to surge 20.83 per cent, or 50 cents, to close at $2.90 yesterday. NWM refused to comment. A merger would mark the industry's first consolidation as the ongoing privatisations of China Resources Peoples Telephone (Peoples Telephone) by China Mobile, and Sunday Communications by PCCW have done nothing to thin out the overcrowded six-player market. Industry players have long said that 3G would be a catalyst for consolidation as those without a licence - NWM and Peoples Telephone - would be marginalised when more 2G users migrate to the new service. One source said that parent New World Development had been seeking buyers for NWM for 'a long time', but the valuation was unattractive. 'You've got Peoples Telephone and Sunday Communications both with strong backing now. Adding an aggressive Hutchison Telecom, there is a lot of motivation for NWM to hook up with someone,' an analyst said. Last December, CSL parent, Telstra, the Australian telecoms giant, also sounded out potential buyers with a net asset valuation of $3-4 billion, but without success. Telstra bought Hong Kong's leading mobile operator for US$2.15 billion in 2000. Yesterday, Telstra said that CSL remained Hong Kong's most profitable mobile operator. 'Telstra and CSL continue to leverage off each others' experience. For example Telstra's smooth launch of 3G was partly based on lessons learnt from CSL's 3G successes.' The group will announce more details of its company-wide strategic review in the middle of next month. NWM targets young mobile users with its 'Star Mobile' celebrity service. CSL operates under two brands: 1010, targeting the corporate big spenders; and One2Free, for younger customers.