Companies discussing merger that would create country’s biggest mobile operator.

Vodafone India and Idea Cellular could finalise their merger by the end of this week.

The Economic Times cited sources on Sunday as saying that the two companies are likely to sign a definitive agreement by 24-25 February.

"They are almost ready to sign the agreement and should not take more than a month to announce it," said another source, in the report.

Amid mounting speculation, Vodafone confirmed in January that it was holding preliminary talks with Idea parent Aditya Birla Group about an all-share transaction.

If a deal is agreed, it would create an operator with 395.2 million mobile subscriptions, according to figures published late last week by the Telecom Regulatory Authority of India (TRAI). That would make it the country’s largest operator, ahead of current market leader Bharti Airtel, which had 265.9 million subscriptions at the end of December 2016.

However, the combined entity would likely have to divest certain assets, including spectrum, in order to comply with competition rules. These rules stipulate that no single telco can have more than a 50% share of subscribers and revenue in a given telecom service area, or circle as they are called in India. Telcos are also limited to accumulating no more than 25% of available spectrum nationwide, and 50% in any one circle.

The ET cited a report from Hong Kong-based brokerage CLSA, which asserts that a merged Vodafone and Idea would breach revenue market share, and subscriber and spectrum caps in five circles.

CLSA said the spectrum that the companies would need to shed is worth around 54 billion rupees (€759.02 million).