A possible merger of Reliance Communications [Get Quote] of India and South Africa's MTN could see Anil Ambani become the enlarged group's chairman and biggest shareholder with a stake of almost 35 per cent.

Mr Ambani, chairman of Reliance, is pushing for a controlling position in the merged entity, even though the deal could be structured as a reverse takeover by MTN. Reliance, India 's second largest mobile phone operator, has been in exclusive talks since Monday with MTN, Africa's largest wireless company, over a merger that would create one of the world's leading telecommunications company, with 114m customers in 22 countries.

The merger talks are focused on the possibility of Mr Ambani swapping most or all of his 66 per cent stake in Reliance for shares in MTN. He could end up with a 34.9 per cent stake in MTN.

The stock swap would incorporate a premium that values MTN's equity at more than R175 ($23) a share, people close to the situation said.

Bharti Airtel [Get Quote], India 's biggest mobile operator, was considering making an offer for MTN at R165-R175 a share before talks collapsed on Saturday.

Phuthuma Nhleko, MTN's chief executive, could hold the same position following a merger with Reliance, with Mr Ambani becoming chairman, said people close to the situation.

Alternatively, Mr Ambani could be co-chairman of the enlarged group alongside Cyril Ramaphosa, MTN's chairman.

MTN's shares closed up 6 per cent at R151. Reliance's shares rose 3.59 per cent to Rs571.65.

As part of the reverse takeover, MTN would be required under Indian rules to make a tender offer to Reliance's minority shareholders for up to 20 per cent of the company's stock.

This could take MTN's holding in Reliance to beyond India 's74 per cent limit on foreign ownership of telecoms companies.

If the tender offer risks a breach of the foreign ownership limit, Mr Ambani could cut the size of his share swap and use cash to bring his MTN holding up to 34.9 per cent.

Under South African rules, any shareholder who has a 35 per cent stake is obliged to make an offer for the remainder. These rules can be set aside if fellow investors give their consent.

MTN's rising status was underlined by how Vodafone earlier this month considered the case for making an offer for the company, but decided against.

Man in the News: Anil Ambani
Reliance could offer MTN right connection
Tata aims to raise $1.8bn in rights issues
Q&A: Lalit Modi
Reliance in fresh approach to MTN