Reliance communication advertisment
The merged entity will be rebranded and will carry over Rs. 14,000 crore in debt transferred from RCom and Aircel. In Picture: A man walks past an advertisement of Reliance Industries Limited at a construction site in Mumbai, India, May.14, 2015.Reuters

Reliance Communications (RCom) and Aircel are likely to sign a merger contract by the first week of September to form the country's third largest telecommunication company by subscriber base.

The merged entity, which could cater to over 196 million subscribers, will carry over Rs. 14,000 crore in debt transferred from RCom and Aircel, says an earlier report. RCom had net debt of Rs. 41,362.1 crore at the end of the 2015-16 financial year, while Aircel's debt figures are not available.

"Term sheet between the two companies has been finalised. Definitive agreement for merger between the two companies is expected to be signed in a week or 10 days," a source close to the development was quoted by PTI.

The process for regulatory approval will begin after the merger agreement is signed. "It should take around four to six months time to complete the merger and then the combined entity will be rebranded," the source added.

The new company will have spectrum licence for all bandwidth which include 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz. The cash flow of the new company is estimated to be around Rs. 7,000 crore, while business from the first day is expected to touch Rs. 25,000 crore.

Meanwhile, the merger between RCom and Sistema Shyam Teleservices is on hold because of Sistema's issue over a spectrum contiguity levy imposed by the Department of Telecommunications.

The two mergers are set in a backdrop where the debt-ridden telecom sector is said to have a debt burden of Rs. 3,50,000 crore. Reliance Jio is expected to exert 4G tariff pressure on telecom majors Airtel, Vodafone and Idea.

Earlier, Idea had denied media reports on its merger with the second largest telecom firm Vodafone. According to Telecom Regulatory Authority's February 2016 data, Vodafone had a market share of 19.16 per cent while Idea was close behind with 17.01 per cent market share.

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