Mumbai
Telecommunications carriers Reliance Communications and Aircel have begun talks to combine their wireless operations to create the country's second-biggest mobile phone operator by customer numbers.
Anil Ambani-led Reliance Communications has entered a 90-day exclusivity period for talks to combine its mobile phone services business with smaller rival Aircel, it said in a statement on Tuesday.
The Reliance mobile phone business is India's fourth-biggest by number of customers, while Aircel, majority owned by Malaysia's Maxis Communications, ranks fifth.
Combined, the duo could overtake Vodafone's Indian business, the No.2 by subscriber numbers.
India's telecoms sector is the world's second-biggest behind China by mobile phone subscriptions, but cut-throat competition in the crowded market of 10 players means low margins for the carriers and industry executives have long called for sector consolidation.
The telecoms unit of Reliance Industries, controlled by India's richest man Mukesh Ambani, is preparing to launch the nation's biggest 4G broadband network, which will increase competition further.
In the first instance of sector consolidation, Reliance Communications last month agreed to buy Russian conglomerate Sistema's Indian mobile phone business in an all-stock deal.
The potential merger will exclude Reliance Communications' tower and optical fibre assets, for which a separate sale process is ongoing.
Reliance Communications this month signed a non-binding pact to sell the business to a group including TPG Capital Management LP in a move to cut its heavy debt load.
The talks with Aircel's owners Maxis Communications and Sindya Securities and Investments are also non-binding, Reliance Communications said.
Unlisted Aircel is battling a heavy debt burden and, according to ratings agency CARE Ratings, posted a consolidated net loss of Rs 46.94 billion ($708 million) for 2014 and Rs 64.04 billion in 2013.
