Indian operator Idea Cellular has announced plans to acquire a sizeable stake in rival operator Spice Communications for around $509m and merge the two companies.

Under the deal, Idea will snap up 40.8 per cent of Spice and will also make an offer for an additional 20 per cent. Altogether, the deal could cost $800m.

In a back to back transaction, Idea will also sell a stake in the merged entity to Telekom Malaysia for around $1.8bn.

Spice will then be merged into Idea, giving the operator entry into the markets of Punjab and Karnataka, which account for 11 per cent of India’s total wireless subscribers.

Telekom Malaysia meanwhile will benefit from a business co-operation with Idea to build on its presence in Asia, including neighbouring countries like Sri Lanka and Bangladesh.