Voda, Idea in talks to create India's largest telco

New Delhi, Jan 30 ()

Britain

's

Vodafone Group

today said it is in talks to merge its Indian unit with

Idea Cellular

in an all-share deal to create the country's largest telecom operator to compete with Reliance Jio that has unleashed a fierce price war. The merger of Vodafone -- the world's second-largest cellphone network operator -- with the

Aditya Birla Group

firm -- India's third-largest cellular operator would create a company with around 387 million users and form one of the largest telecoms companies in the world. In a statement, the UK-based company said it is in talks with Idea about an all-share merger, but the deal under consideration excludes its 42 per cent holding in

Indus Towers

, a joint venture with

Bharti

and Idea. "Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone de-consolidating

Vodafone India

," the company said. "There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction." Since its entry in India in 2007, Vodafone has become number 2 operator in the country, but its journey has been tumultuous as it is locked in a legal battle with the government over a USD 2 billion retrospective tax claim over its acquisition of Vodafone India from

Hutchison

in 2007. It had written down value of business by 5 billion pound (USD 3.35 billion) late last year. The British firm has pumped in more than USD 7 billion into the India unit. Backed by India's richest man, Reliance Jio Infocomm is offering free voice calls and data till March and has notched up 74 million users. It has already invested over USD 25 billion and is investing another Rs 30,000 crore (USD 4.8 billion). The

Aditya Birla

group owns 42.2 per cent of Idea while Malaysian carrier

Axiata Group Bhd

has a 19.8 per cent stake.

Vodafone India Ltd

is a wholly-owned unit of Vodafone Group Plc. Idea rose as much as 29 per cent, the most since the shares began trading in 2007, taking the company's market valuation above USD 5 billion. Vodafone gained as much as 4.1 per cent. In a separate BSE filing, Idea Cellular said it plans to raise Rs 500 crore through non-convertible debentures on private placement basis. MBI ARD