This article first appeared in The Edge Financial Daily, on November 3, 2015.

MUMBAI: Billionaire Anil Ambani’s Reliance Communications Ltd agreed to buy Aktsionernaya Finansovaya Korporatsiya Sistema OAO’s Indian wireless unit in an all-stock deal that would create a carrier with 118 million subscribers.

Sistema Shyam Teleservices Ltd, the Indian unit of the Russian company controlled by Russian tycoon Vladimir Evtushenkov, will hold about a 10% stake in the merged entity and pay off its existing debt before closing the deal, Reliance Communications said in a statement to exchanges. The companies had been in discussions since June. The deal marks the start of consolidation in the world’s second largest wireless market where stiff competition among 12 carriers for more than 988 million subscribers has resulted in tariffs that are among the lowest globally.

Sistema has seen its subscriber base decline over the past five years while Reliance Communications, the country’s fourth largest carrier, had almost 110 million subscribers. Reliance Communications shares rose 1.8% to trade at 76.65 rupees (RM5.03) at 12.38pm in Mumbai, compared with a 0.8% decline in the S&P BSE Sensex Index, giving the company a market value of 190 billion rupees.

“Merging its Indian assets with those of a larger rival is the most favourable outcome for Sistema,” said Konstantin Belov, an analyst at UralSib Capital.

The deal will make Reliance Communications the largest holder of the 800/850 megahertz band for wireless fourth-generation services. The company will pay yearly instalments of 3.92 billion rupees to the Indian government for Sistema’s spectrum for the next 10 years, according to the statement.

Billionaire brothers Mukesh and Anil are also working on a partnership to share each other’s resources for Reliance Jio Infocomm Ltd’s nationwide 4G phone networks after Indian regulations allowed operators to trade airwaves.— Bloomberg