* Lenders have given it a reprieve until December - Ambani
* RCom to complete merger with rival by September - Ambani (Updates with details, background)
By Sankalp Phartiyal and Devidutta Tripathy
MUMBAI, June 2 (Reuters) - Anil Ambani, chairman of India's Reliance Communications, said on Friday its lenders had agreed to a plan which gives the company a reprieve on its loans until the end of the year, providing a much-needed breathing space.
Once the flagship of Ambani's business empire, Reliance Communications' market value has slumped by a third since early May, battered by concerns over the company's ability to repay its debts as wafer-thin margins and competition hit profits.
Under the temporary deal, Reliance Communications, known as RCom, will get some relief as it pursues two deals which the company expects will reduce its debt by 250 billion rupees ($3.9 billion).
Ambani said the transactions - the merger of its wireless division with rival Aircel and the sale of a stake in its mobile masts business - would be completed by September.
"We had a meeting of all the lenders for RCom and presented our plan for the strategic transformation and I am happy to report that our plans have been accepted by the lenders," Ambani told a media briefing.
The rare appearance by the 57-year-old billionaire followed a tough week for RCom, part of Reliance Group which also includes financial services, power and infrastructure businesses.
RCom, India's seventh-ranked mobile carrier by users, posted a second consecutive quarterly loss at the weekend, then had its credit ratings downgraded. Its shares fell to record lows. RCom stock - which ended Friday at 20.65 rupees a share, valuing the company at under $800 million - suffered its worst week since October 2009 with a 19.8 percent fall.
Costly airwave auctions have bruised India's telecom sector, but it was a price war triggered by the arrival last year of Reliance Jio Infocomm Ltd, run by Anil's elder brother and India's richest man, that brought the sector to its knees.
Jio, owned by Mukesh Ambani's oil-to-retail Reliance Industries, offered free voice and data for months. Almost all of India's mobile operators posted a loss in the March quarter and the one exception, Bharti Airtel Ltd , recorded its smallest profit in four years.
Vodafone moved its focus elsewhere in March, merging its Indian business with Idea Cellular.
Discussing the two pending deals, Ambani said he would be open to listing the merged wireless company, to be called AirCom, in which Reliance Communications will hold a 50 percent stake.
The completion of the two should reduce RCom's nearly $7 billion of net debt by 60 percent.
But RCom has longer term concerns as it overhauls the business, and it said on Friday that it would present lenders with "sustainable long-term plans" to service the remaining debt of 200 billion rupees.
Ambani ruled out any sale to Jio, reiterating the two companies would continue to operate separately.
Instead, Ambani sought to reassure investors about RCom's future, saying it would emerge healthier than cash-burning rivals.
"I think that we are in a unique position as a telecom operator to create long-term shareholder value, sustainable profitability and also build a conservative debt profile." (Additional reporting by Promit Mukherjee and Swati Bhat; Editing by David Clarke and Jane Merriman)