The deal with Mumbai-based Reliance ADA Group is the initial step in Spielberg's and DreamWorks co-founder David Geffen's plan to leave Paramount Pictures and set up their own studio to make films to be distributed by a soon-to-be-determined studio.

Speculation has swirled for months regarding the next probable move for the duo as their long-troubled relationship with DreamWorks parent Paramount, a unit of Viacom Inc, flared up publicly last fall.

Under the agreement, Reliance ADA would invest about $500 million equity in the new movie venture and another $500 million in debt through JP Morgan Chase & Co., the Wall Street Journal said, quoting people familiar with the matter.

A Reliance ADA spokeswoman did not immediately return calls seeking comment. People familiar with the situation say an agreement will probably be reached next week, allowing Spielberg and his DreamWorks team to leave Paramount as early as November, the paper said.

Spielberg is said to be looking closely at General Electric Co.'s Universal Pictures, where he started his career, to distribute the venture's films, though no agreement has been reached.

DreamWorks was acquired by Paramount for $1.6 billion in 2006 and produced such hits as "Dreamgirls" while under Paramount's roof.

This adds yet another twist to the Idea-Spice merger. ET had first reported in June, that following the acquisition, Idea Cellular has written to DoT seeking regulatory clarity on a host of issues, including the licenses and radio frequencies that were recently awarded to Spice. The merger has come under DoT scrutiny as the department is of the view that it violates the newly issued guidelines on mergers and acquisitions — the norms disallow mergers between operators in the same circle for a period of three years when the from the date the license is granted.

The issue is as follows: On January 2008, Idea was awarded licenses for several new circles including Karnataka and Punjab. However, in June 08, it acquired Spice, which held licenses in these circles and also offered mobile services in these two states. Idea has now told the DoT that if it were in violation of the licensing norms on the grounds that it holds overlapping licenses in these two circles, the company will demerge the licenses it had been awarded for these zones in January and sell them. The move will not impact Idea’s operations in these two circles — this is because, it will continue to have a presence in these circles via Spice Communications, which is currently being merged with Idea. Idea can therefore give up its licenses in these two circles, especially considering that it has not launched any cellular operations under these licenses. Idea has also clarified that following the demerger of these licenses, neither it, nor any of its associate companies will hold more than a 10% stake in them, as Indian laws do not allow telcos to hold more than 10% stake in two different licenses in the same circle.

Idea has also said that if the DoT did not accept this option, it is willing to surrender the licenses issued to it in January 08 for Punjab and Karnataka. In this scenario, the company has said that the DoT must refund the Rs 300 crore it has paid as entry fee for its licenses in these circles. Similarly, in January 08, Spice was awarded mobile licenses in four circles — Delhi, Haryana, Andhra Pradesh and Maharashtra.

“Nothing has gone wrong since we announced the deal with WL Ross last month. The delay, if there is any, is normal,” said the SpiceJet spokesperson. Ajay Singh, director of SpiceJet and owner of about 4% stake in the low-cost carrier, could not be contacted. He did not reply to text messages also. Last month, American PE firm WL Ross & Co, promoted by Ross, had announced an investment of $80 million in SpiceJet. The fund infusion is aimed at clearing the budget carrier’s debt as well as meeting its working capital requirements. SpiceJet owes about Rs 55 crore to its creditors. Analysts said a deal with Kingfisher might put a question mark on the identity of SpiceJet and, therefore, the SpiceJet management would not allow it to happen.

An analyst working with a foreign brokerage said: “You may consider the WL Ross-SpiceJet deal is a done one. There is no scope for any other investor like Kingfisher to enter the scene now.”