MUMBAI, July 19 (Reuters) – Emirates Telecommunications ETEL.AD (Etisalat) is close to buying 26 percent in Indian telecoms Reliance Communications (RLCM.BO), the Financial Times said on Monday, sending Reliance shares up nearly 4 percent.

Citing people familiar with the negotiations, the newspaper said the deal was estimated to be worth $3 billion.

The two groups are also considering merging Reliance Comm, India’s No. 2 mobile operator, with Swan Telecom, the Indian company in which Etisalat holds a 45 percent stake, it said.

Reliance Comm and Etisalat could not be immediately reached for comment.

Shares in Reliance Comm, valued by the market at $8.3 billion, jumped as much as 3.9 percent on the report in a subdued Mumbai market.

An alliance between the two groups could be completed as soon as mid-August, the Financial Times reported, citing a person close to the matter. Another person told the paper it could take up to the end of the year. Reliance Comm and Etisalat declined to comment on any specific negotiations, the paper said.

A successful outcome hinges on how fast Etisalat can free itself of the stake in Swan Telecom, a joint venture it acquired in 2008, as Indian regulations do not allow one company to own more than 10 per cent in two telecom groups, the paper said.

Several potential suitors cited in media reports based on unnamed sources have denied being in talks with Reliance Comm, controlled by billionaire Anil Ambani.

So far, only Abu Dhabi-based Etisalat has acknowledged that it is considering a deal with Reliance Comm, the only major local cellular carrier without a foreign strategic investor in the world’s fastest-growing mobile market.

Anil Ambani has been in dealmaking mode since ending a pact in May with his long-estranged brother, Mukesh Ambani, that forbade the two from competing on the other’s turf, freeing Anil to bring new investors into his debt-laden company.

That pact had enabled Mukesh Ambani, the world’s fourth-richest man, to assert a right of first refusal two years ago that blocked a deal between Reliance Comm and South Africa’s MTN (MTNJ.J).

Last month, Reliance Comm agreed to merge its telecoms communication towers business with that of GTL Infrastructure Ltd (GTLI.BO) in a deal that a source said would cut its debt by $3.9 billion.

By 0443 GMT, shares in Reliance Comm were up 2.3 percent at 191.40 rupees, while the main BSE index .BSESN was flat. (Reporting by Pratish Narayanan and Tony Munroe in Mumbai; Stanley Carvalho in Abu Dhabi; Editing by Ranjit Gangadharan)