By Sankalp Phartiyal and Devidutta Tripathy
MUMBAI (Reuters) - India's Reliance Communications Ltd will combine its wireless business with smaller rival Aircel to create the nation's third-biggest cellular carrier by subscribers, the companies said on Wednesday, as intensifying competition fuels consolidation in the world's second-biggest telecoms market.
Reliance Communications, controlled by billionaire Anil Ambani, will own half of the merged the entity, while Aircel's parent, Malaysia's Maxis Communications Bhd, will own the other half, the two sides said in a joint statement.
The deal will help reduce Reliance Communication's debt by 200 billion rupees ($3 billion), or more than 40 percent of its total debt, while Aircel's debt will fall by about 40 billion rupees, the companies said.
As of end-March, Reliance Communications had a net debt of 413.62 billion rupees, according to latest company data. Closely-held Aircel had 185 billion rupees of debt as of 2013, according to rating agency ICRA.
"We expect this combination to create substantial long term value for shareholders of both, RCOM and MCB, given the benefits of the wide-ranging spectrum portfolio and significant revenue and cost synergies," Reliance Communication's chairman Ambani said in a statement.
The companies had entered into exclusive talks in December last year.
India's telecoms market is the world's second-biggest behind China, with more than 1 billion mobile phone subscriptions, but tough competition means low margins for the 10 carriers.
Reliance Jio, a new telecoms venture backed by India's richest man Mukesh Ambani, Anil's elder brother, is expected to shake up the market and trigger a price war with its cut-rate offerings.
In the first sign of sector consolidation, Reliance Communications in November agreed to buy Russian conglomerate Sistema's Indian mobile phone business in an all-stock deal.
($1 = 66.9094 Indian rupees)
(Reporting by Sankalp Phartiyal and Devidutta Tripathy, editing by Louise Heavens)
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