According to the Business Standard, Reliance Digital TV, the fully-owned subsidiary of Reliance Communications that runs its direct-to-home (DTH) operations, will merge with Sun Direct. The deal is set to help RCom reduce debt, and for Sun to gain subscribers in new markets.

Under the deal, to be announced in a few days, Reliance Communications (RCom) will have 26 percent stake in the merged entity, the report added. The merged company will also take over about Rs 1,500 crore of debt from Reliance’s DTH operations. As of June 30, RCom’s total debt stood at Rs 38,400 crore, according to the report.

As part of the deal, Sun Direct will later go for an initial public offering. Reliance will then exit the merged company.

The deal will help the Anil Ambani-led Reliance Group reduce RCom’s debt by Rs 3,000 crore. After the deal, management control will shift to the Marans, who own Sun Group, according to the Business Standard, which reported that Reliance DTH has a gross subscriber base of 4.1 million. It runs 260 channels on high-density format. Sun Direct has a subscriber base of about 8.5 million.

The report also added that the deal is vital for Sun Direct, which has strong presence in the south, but not in the north and west, where Reliance has a large subscriber base. It also marks the beginning of consolidation in the DTH business, now facing tough competition from digital cable TV operators, especially after the government mandated subscribers and multiple system operators to shift from analogue to digital technology.

The report states that Sun Direct, an 80:20 joint venture between the Maran family and Malaysia’s Astro Group, specialises in catering to regional tastes, through MPEG-4 technology. After its launch in Tamil Nadu in December 2007, it expanded to other Southern states, hitting the one-million-subscriber mark in less than 200 days. In September 2008, it rolled out pan-Indian operations.