The new entity will become the third largest mobile carrier in the country, after Airtel and Vodafone
India's Reliance Communications and Aircel announced a merger of their telecom businesses on Wednesday.
The companies will each own 50 per cent of the merged carrier, the two sides said in a joint statement. The merger will create the nation's third-biggest mobile phone network operator in terms of subscribers, Reuters reported. The new entity will operate under a new brand name; the new name has not yet been announced.
"The RCOM-Aircel combination will create a strong operator clearly ranked amongst India's top four telcos by customer base and revenues," the statement said.
RCOM controlled by billionaire Anil Ambani is currently the fourth-largest mobile carrier by subscribers. The deal will help cut Reliance Communication's debt by 200 billion rupees ($3 billion), or more than 40 per cent of its total debt. Aircel, owned by Malaysia's Maxis Communications Bhd, ranks sixth in the market and will see its debt fall by about 40 billion rupees.
The combined business will have a debt of about 280 billion rupees.
"It is just another way of surviving," Jigar Shah, chief executive at Maybank Kimeng Securities India, said to Reuters. "They can become better only if the two partners bring further cash into the business and they buy a reasonable amount of 4G spectrum."
With more than 190 million customers after the merger, it will overtake Idea Cellular Ltd in terms of subscription numbers.
Reliance's new 4G telecom venture by the Anil's elder sibling Mukesh Ambani has further intensified the competition. Reliance Jio offers free voice calls for life and vastly cheaper data plans compared to the leading Airtel and Vodafone networks.
The companies had started the negotiations for the deal in December last year.
($1 = 66.8061 Indian rupees)
(WION with inputs from agencies)