India’s fourth largest operator Reliance Communications (RCom) and smaller rival Aircel signed definitive documents paving the way for “the largest-ever consolidation in the Indian telecom sector”.

The combination will create the country’s third largest operator.

It will have an 18 per cent market share and about 188 million mobile connections, pushing it ahead of current number three Idea Cellular, which has 175 million connections (17 per cent share), but leaving it slightly behind number two Vodafone India with 198 million (19 per cent share).

Market leader Bharti Airtel has 254 million connections and nearly a 25 per cent share.

RCom and Maxis Communications, owner of Aircel, will both hold 50 per cent of MergedCo, with equal representation on the board and committees.

According to Economic Times, the merged company will bring in a third partner to raise an estimated INR60 billion ($895 million) in equity. It said talks have already been started with Russia’s Sistema, which holds 10 per cent in RCom (RCom last year struck a deal to acquire Sistema Shyam Teleservices for about $690 million).

RCom and Aircel had been in merger talks for nearly a year, and had twice extended the exclusivity period for talks by 30 and 60 days in May and March. RCom and Maxis reportedly agreed earlier in the year to a 50:50 ownership structure if a deal was reached.

Rcom is to demerge its wireless business in order to enable the deal, but will continue to own and operate its enterprise, data centre and fibre optic assets, as well as owning real estate.

The deal is still subject to a number of approvals, including share holder, regulatory, and lenders’ consent. Closing is anticipated in 2017.

Spectrum deals
The new unit will take advantage of spectrum deals with 4G upstart Reliance Jio, which is run by Mukesh Ambani, brother of Reliance Group chairman Anil Ambani.

As part of a raft of cross-operator deals since the regulator eased spectrum trading and sharing rules last year, RCom and Reliance Jio in January finalised a spectrum sharing and trading alliance that saw RCom sell 800MHz spectrum in nine regions to Jio and both share bandwidth in the same band in 17 service areas.

In April, Aircel agreed to sell Bharti Airtel 4G spectrum in eight service regions for INR35 billion, which will give it a nationwide 4G footprint to match Jio’s pan-India coverage.