Reliance Communications confirmed on Monday it has entered into exclusive talks with Russian conglomerate AFK Sistema about merging their respective Indian mobile operations.
The deal could pave the way for Sistema to exit the country altogether.
Sistema Shyam TeleServices Ltd (SSTL) is a minnow in India’s mobile market, operating in nine of the country’s 22 telecom circles and ranking ninth with 8.9 million subscribers at the end of March.
By comparison, fourth-placed Reliance Communications had 109.5 million customers. In the nine circles where RCom’s operations overlap with SSTL’s, the former has approximately 49.6 million mobile customers.
Rumours that the two companies were holding talks first emerged in May.
"Reliance Communications and AFK Sistema have entered into exclusive discussions on a potential merger between the Indian telecom business of SSTL and RCom through a stock swap," said Reliance Communications, in a statement on Monday. "There is no certainty that any transaction will result."
SSTL was embroiled in the 2008 spectrum scandal that came to light in 2011. All but one of its 22 2G licences was cancelled after it emerged that it was one of several telcos to have underpaid for spectrum.
SSTL regained some lost ground in 2013 when it won frequencies in eight telecom circles for 36.4 billion rupees (€514.8 million), but now it seems to lack the scale to survive in India’s fiercely-competitive mobile market.
