While the BPL-led consortium will get 49.32 per cent in the merged entity, the Birla-Tata-AT&T combine will hold the balance 50.68 per cent. The venture could go for an IPO at a later stage.

The final shareholding structure effectively values BPL’s operations, which has almost 7 lakh subscribers, higher than that of Batata, which has 4 lakh users.

Due to regulatory hindrances, BPL’s Maharashtra circle will be kept out of the merger. After hiving it off, the circle, which has 1.4 lakh users, will be put on the block. The approximate valuation for would be around $250-300 million, sources close to the deal said.

The venture will provide cellular services in Mumbai, Gujarat, Madhya Pradesh, rest of Maharashtra, Andhra Pradesh, Tamil Nadu, Kerala, Goa and Chattisgarh, covering almost 51 per cent of all fixed line users.

Kumar Mangalam Birla, chairman of the Aditya Birla group, said: "The biggest advantage will be that of contiguity, once interconnection is allowed."

Ratan Tata, chairman of Tata Industries, said: "The new combine will create an even stronger force, with a large subscriber base and a large footprint."

BPL, by virtue of its 60 per cent holding in BPL Communication, will be the single largest shareholder with around 29.6 per cent, while the Birlas, the Tatas and AT&T will have an effective stake of 16.8 per cent each.

BPL Mobile and BPL Cellular, the two operating subsidiaries of BPL Communications, are likely to exist as subsidiaries of the merged entity. France Telecom, a 26 per cent stakeholder in BPL Mobile, the Mumbai circle operator, will not hold any shares in the merged entity.

Asked whether the world’s largest cellular company was supportive of the merger, Rajeev Chandrashekhar, head of BPL’s telecom business, said: "France Telecom has been apprised of the merger. They have supported the move."

Incidentally, Media One, which is a 49 per cent shareholder in BPL Cellular, is owned by AT&T, a one-third owner of Batata.

Nimesh Kampani, chairman of JM Morgan Stanley, advisors to BPL, said the exact equity base of the merged entity is yet to be decided. "The modalities are being currently worked out," he said.

While Batata has an outstanding debt of around Rs 1,600 crore on an equity base of Rs 1,200 crore, BPL Communications’ debt is pegged at around Rs 2,300 crore. Chandrashekhar said the merger will allow the alliance better financial leverage for its future plans.

The name of the merged entity is yet to be decided. The company will also have a new brand through which the services will be offered. "The brand will be completely neutral and independent of its three Indian promoters," Birla said.

The partners also have to decide on who will head the new company. The exact constitution of the board of directors has also not been decided. The merger will be subject to regulatory clearances and approvals from the boards of the respective companies. Kampani said the merger could take anything between 3-6 months.