Reliance Communications’ (RCom) planned merger with Sistema Shyam Teleservices (SSTL) may help give it the scale to better compete with the top three operators, but the potential move highlights the country’s ambiguous spectrum holding rules, the Economic Times said.

The Department of Telecom’s (DoT) M&A rules state that “the spectrum cap for each operator in each service area in the 800MHz band will be calculated as 50 per cent of the total spectrum assigned”. But an M&A rule notice last year noted that the spectrum ceiling for the 800MHz band was set at 10MHz per region, the Times reported.

Given the apparent confusion, a DoT representative told the Times that it would make a final call once an M&A deal needs to be cleared.

Russian investment firm Sistema, which controls SSTL, confirmed earlier in the week it has entered into “exclusive discussions” with RCom.

Rcom is the fourth largest operator in India with 109.5 million connections, while SSTL (know as MTS in India) is one of the smallest with 8.9 million, but has 850MHz spectrum in eight service areas, which complements RCom’s recently purchased 850MHz in two regions.

Credit Suisse said in a report that SSTL provides a “a good complementary fit” for RCom given its 850MHz holding, which can be used for 4G service.

An RCom representative said if the combined 850MHz holding is over the 50 per cent cap, the excess holding could always be traded or shared to meet the mandated limit.

Last week the DoT finalised the rules on spectrum sharing and trading. The new regulations will be sent to the cabinet for approval by the end of the month. While the Telecom secretary declined to give details on the new guidelines, they are expected to be broadly the same as those recommended by the Telecom Regulatory Authority of India (TRAI).

The Times noted that the Supreme Court is expected to hear the spectrum cap case next month.