Spice Communications, a regional Indian mobile services provider, is to merge with a large Indian operator Idea Cellular, continuing an ongoing consolidation in the Indian mobile services market.

Under an arrangement announced by the two companies on Wednesday, MCorpGlobal Communications, a promoter of Spice Communications, will divest its 40.8% stake in Spice to Idea for 21.8 billion Indian rupees ($507 million). Idea will also pay MCorpGlobal Communications a non-compete fee of 5.44 billion rupees.

The boards of the two companies also approved a merger of the two operators at a swap ration of 49 shares of Idea for every 100 shares of Spice. TM International, another shareholder in Spice Communications, will be a shareholder in Idea after the merger.

Idea offers mobile services based on the GSM standard in seven service areas. The deal gives Idea entry into two additional service areas, Punjab and Karnataka, which account for 11% of India's total number of wireless subscribers, Idea said. Spice had 4.4 million subscribers in the two markets as of April 30, it added.

The Indian mobile market is booming, and added 8.21 million subscribers in April. A number of companies are interested in expanding their presence in the country. Vodafone Group, for example, acquired a majority stake in Hutchison Essar, a large Indian network operator and services provider, that was later renamed as Vodafone Essar. Earlier this year, India's Tata Teleservices announced an agreement to launch services under the Virgin Mobile brand in India.

The IDG News Service is a Network World affiliate.

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