The merit list does have Candidates belonging to both AU and SVU. To give you a glimpse,

OU includes districts like Mahbubnagar, Rangareddy, Hyderabad, Medak, Nalgonda, Warangal, Khammam, Karimnagar, Nizamabad, Adilabad.

AU area includes districts Srikakulam, Vizianagaram, Visakhapatnam, East Godavari, West Godavari, Krishna, Guntur, Prakasam.

S.V.U. area  includes the districts Nellore, Anantapur, Chittoor, Kadapa, Kurnool.

And to be locale to an area you should have stayed in that area for atleast a period of 7 years. But if a Candidate has spent 7 years in 2 areas, the area in which he has spent atleast 4 years will be considered his local area. Going by this, AU and SVU area Candidates cannot be considered for Telangana State Counselling Now if a resident of AP who has the domicile of AP has studied more than 4 years in OU area, even he/she is eligible for appearing for Telangana State Counselling.