The two companies, which have been working on a complex $23 billion cash and share swap for over two months, said on Monday that exclusive talks will be extended until late August and that the terms of the potential deal may be adjusted.

"In terms of the price increase, we are talking about 5 to 10 percent, closer to the upper end, and the mix between cash and shares (has) increased a little bit more towards the cash portion than the share portion," the source told Reuters.

MTN and Bharti both declined to comment.

The increase in price will likely be in the range of 8 to 9 percent, the source added, and an agreement could be reached in a couple of weeks.

But a second person close to the proceedings cautioned that any improvement to the terms had yet to be agreed.

"It is not clear yet as the sweetener is one (among a number of) issues being debated," the person said.

A sweetener below 5 percent would not make a substantial difference to the current proposal, while raising the offer price by more than 10 percent would require major changes to the deal structure, the second person added.

Bharti and MTN hope that the deal will lead to a full merger, creating the world's third biggest cell phone group, with more than 200 million customers and combined revenues of $20 billion.

Better terms

Some of MTN's shareholders have been holding out for a higher price, saying Bharti needs to pay extra for effective control of the South African company.

Bharti trades at a 10 percent price to earnings discount to the market, suggesting the stock is pricing in another $1.2 billion sweetener, Morgan Stanley said in a research note this week.

"We believe the easiest way for Bharti to bid higher would be to pay 99 rand a share instead of 86 rand to acquire the initial tranche of 36 percent of MTN," Morgan Stanley said.

Under the complex initial terms, MTN and its shareholders would take a 36 percent interest in Bharti and the Indian firm would end up with 49 percent of MTN.

Bharti would buy about 36 percent of existing MTN shares at 86 rand each, plus half a newly issued Bharti global depositary receipt, to be listed in Johannesburg, for each MTN share.

This offer and the shares MTN issues for its stake in Bharti would take the Indian firm's holding to 49 percent of MTN's enlarged capital.