South Africa's Treasury said it was processing an exchange control application from MTN for a proposed tie-up with India's Bharti Airtel, in the clearest indication yet that the deal is proceeding despite some shareholder opposition.

The National Treasury has received an application via the South African Reserve Bank that relates to various exchange control regulations, spokeswoman Thoraya Pandy said on Wednesday.

We are still processing the application and therefore cannot provide any further comment on the application.

MTN and Bharti agreed to extend discussions to Sept. 30, after previously lengthening talks by a month to Aug. 31, as they negotiate a $23 billion cash and share-swap deal aimed at an eventual full merger.

The application suggests the talks on the deal are gaining momentum ahead of the latest deadline, and that the parties are closer to agreement on what funds may be exchanging hands.

The South African Treasury and central bank would have to consider whether the flow of money relating to the proposed deal infringes on exchange control laws and if any exemptions are necessary.

A combined Bharti-MTN would be the world's third-biggest mobile operator by subscribers after China Mobile and Vodafone. But its annual sales of $20 billion would be dwarfed by China Mobile's $60 billion and Vodafone's $65 billion.

On Tuesday, the South African government declared support for the deal which MTN and Bharti have been negotiating since May.

MTN shares were flat at 127.02 rand by 1208 GMT, outperforming a 1.32 percent weaker JSE blue chip Top-40 index .TOPI. Shares in Bharti were down 2.13 percent at 412.65 rupees.

(Reporting by Gugulakhe Lourie and Gordon Bell; Editing by Jon Loades-Carter)