Mumbai: Reliance Communications, which is to merge its wireless business with smaller rival Aircel, said on Thursday the combined carrier would look to raise about $1 billion in equity from outside investors for expansion and to pay for mobile spectrum.

Billionaire Anil Ambani-controlled Reliance Communications (RCom), and Aircel parent Malaysia’s Maxis Communications will each own 50% of the mobile phone operator, which will be India’s third-biggest by customers, the companies said when they announced the deal on Wednesday.

“We are looking at around a billion dollar of investment into the company," Punit Garg, President at RCom, said on a conference call on Thursday.

RCom executives also said the merged carrier might have to pay additional fees to the government for certain mobile spectrum held by Reliance Communications in 14 of India’s 22 telecoms zones.

When asked how these payments would be financed, Garg said: “There’s enough interest we’ve received from international financial investors in the merged company." He said the merged group would be talking to potential investors between now and when the deal is expected to close in the first half of next year.

Also Read: RCom clears some air on Aircel merger but investors not happy

Garg did not quantify the government fees, but said the merged carrier could also raise another $1 billion in bank debt if required to fund its expansion plans.

The combined company will start with bank debt of about Rs28,000 crore ($4.2 billion) on its books, RCom executives said.

RCom, with a net debt of Rs42,000 crore as of end-June, expects to cut this by Rs20,000 crore as it transfers part of the debt to the new venture.

Aircel, with about Rs18,000 crore in debt, will cut it by Rs4,000 crore through sale of airwaves and mobile masts, RCom executives said. It will transfer the remainder Rs14,000 crore in debt to the new venture.

RCom is looking to sell its mobile towers business to cut debt and expects to seal a deal by October, Gurdeep Singh, chief executive of the company’s consumer business said on the call.

RCom will continue to operate its undersea cable business and data centres after transferring the wireless arm to Aircel.

RCom shares closed 2.6% lower on Thursday, after rising as much as 3.6% in early trade.

HSBC analysts said they were concerned about the merged company’s ability to retain customers as it focuses on reducing its debt, maintaining their “reduce" rating on the RCom stock. Reuters