In a major consolidation move, Britain-based telecom major Vodafone Plc on Monday said that the company has initiated talks to merge its Indian unit with Idea Cellular in an all-share deal to create the country’s largest telecom operator to take on Reliance Jio which broke a fierce price war among telecom operators in the country.

It is learnt that 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 issued by Vodafone said that the company 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, adding that there is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.

With this move, shares of Idea Cellular surged a massive 26 per cent on the bourses on Monday after the global telecom giant confirmed that it is in discussion to merge its India mobile business with Aditya Birla group firm. On BSE, the stock also jumped 25.90 per cent to close at Rs 97.95. During the day, it gained 29.2 per cent to Rs 100.50.

However, experts said that the above deal would help also give Vodafone a listing opportunity in India, as Idea is already listed on the Indian bourses. “As far as debt levels are concerned, the merged entity would have net debt of Rs 71,800 crore. As on September 2016, Idea Cellular had reported revenues of Rs 9,225 crore, making a loss of Rs 43 crore for the three months. However, this deal may face trouble over a breach of spectrum limits that could force the merged entity to sell off valuable airwaves in a few circles,” said the experts.

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 $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 ($3.35 billion) late last year. The British firm has pumped in more than $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 $25 billion and is investing another Rs 30,000 crore or $4.8 billion.

As far as stake break-up is concerned, the Aditya Birla group owns 42.2 per cent stake of Idea while Malaysian carrier Axiata Group Bhd has a 19.8 per cent. But 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 $5 billion. Vodafone gained as much as 4.1 per cent.

In a separate BSE filing, Idea Cellular also said it plans to raise Rs 500 crore through non-convertible debentures on private placement basis.