Key regulatory restrictions could make it difficult for companies such as Bharti Airtel in case they want to bid for Hutchison's stake in Hutchison Essar.
While Sunil Mittal said the question was hypothetical and depended on what the Ruias did, the group has to surrender scarce spectrum if the two companies were to merge under the existing rules.
Analysts said as per the merger guidelines, the merged entity could not hold more than 15 MHz of spectrum in metro and A category circles, and 12.4 MHz spectrum in B and C circles, after aggregation of spectrum held by individual merging entities.
If Bharti and Hutch were to merge, the new entity, analysts said, would have to surrender spectrum in eight circles as the aggregated spectrum crosses the limits set up as per the Department of Telecommunications guidelines.
Regulatory experts said the 15 MHZ rules were likely to change as they were "not based on logic". One of them said, "The rules were made when each individual operator used to get 10 Mhz, now that limit has been upped to 15 MHz. Obviously, these rules will have to change."
But contrary to what many might believe, the merger of Reliance with Hutch does not violate laws on market dominance.
The rules on mergers and acquisitions in the telecom sector clearly state that the new entity cannot have more than 67 per cent market share in each circle (CDMA and GSM combined). Two, there should be a minimum of three operators in each circle and three prior approvals from the DoT.
At the moment, if the merger happens, the Reliance Hutch combine will have an over 50 per cent market share only in three circles.
The only other two rules which operators have to take into consideration are: An operator cannot take more than 10 per cent equity stake in a competing company in the same circle, and even after acquisition, Indian partner must have at least 10 per cent stake in the company.