Under the deal, besides Loop Mobile's subscribers, Bharti Airtel will also take over the former's towers and other network assets.

The government is yet to formally announce its M&A guidelines for the sector, but the deal can go through even under existing norms.

Loop Mobile, which offers GSM services in the Mumbai circle, has about 3.2 million subscribers and a blended average revenue per user (ARPU) of over Rs 225 - much higher than the industry average of about Rs 100 and Bharti Airtel's ARPU of Rs 195.

With about 4.1 million subscribers, Bharti had so far been lagging behind Vodafone (6.8 million) in user base in the Mumbai circle. The addition of Loop's 3.2 million high-ARPU customers will take Bharti Airtel's total subscriber base in the Mumbai circle to 7.3 million - the largest in the circle. However, Bharti Airtel will not get any spectrum from the deal, as Loop Mobile's 20-year licence (900-MHz band) expires in November 2014 and the company did not participate in the recently-concluded spectrum auction.

The deal will bring together Loop Mobile’s 2G/EDGE enabled network supported by 2,500 plus cell sites, and Airtel’s 2G and 3G network supported by over 4000 cell sites across Mumbai. It will also offer subscribers the widest exclusive retail reach with 220 outlets. Further, as part of the deal, some of the other assets, such as network equipment, will also be sold. Loop Mobile's Rs 4 billion debt will be transferred to Bharti Airtel.

Earlier, Loop Mobile held talks with a few other investors, but the deal did not go through. The company was left with no choice except being sold off after the Telecom Disputes Settlement and Appellate Tribunal dismissed its plea for renewal of licence in Mumbai, just before the auction.