Shares in India’s third-biggest telco Idea Cellular surged 8 per cent on speculation about a takeover by rival Vodafone, despite a firm denial by Idea’s parent group.

The country’s telecoms sector is bracing for major disruption at the hands of oil products giant Reliance Industries, which has invested about $24bn to build what it says will be India’s first world-class mobile broadband network, writes Simon Mundy in Mumbai.

The television network CNBC-TV18 – which is controlled by Reliance Industries – reported on Wednesday that Idea and Vodafone were in exploratory talks on a merger that would create the country’s biggest mobile operator by revenue. Vodafone currently ranks second behind market leader Bharti Airtel.

Aditya Birla, which owns a controlling stake of about 40 per cent in Idea Cellular, strongly rejected the report as “absolutely false”. Vodafone declined to comment, but a person close to the company played down the report, noting that the combined entity would breach regulatory limits on spectrum and market share in several of India’s 22 regional telecom “circles”.

But Naveen Kulkarni, an analyst at PhillipCapital, said the companies would still be able to satisfy regulators by selling spectrum and suspending registration of new users in certain regions.

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