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In a move that may result into debt reduction of the company along with consolidation within the sector, Reliance Communications on Tuesday announced that it has entered into talks with shareholders of Aircel for a potential merger of the wireless or mobile businesses of the two companies.
RCom said, “It has entered into a 90-day exclusivity period with Maxis Communications Berhad and Sindya Securities and Investments Private Limited, the shareholders of Aircel Limited, to consider the potential combination of the Indian wireless businesses of RCom and Aircel.”
The announcement comes at a time when RCom is in the process of merging Indian mobile business of Sistema Shyam Teleservices under MTS brand. Earlier, on November 2, RCom had announced the demerger of the wireless business of SSTL in India into RCom leading to acquisition of 9 million customers. It also entered into a non-binding pact with Tillman Global Holdings, LLC and TPG Asia Inc on December 4, to sell its tower and related infrastructure business.
A source close to the development told that if the demerger with Aircel goes through, the mobile business of the three companies — RCom, MTS and Aircel, will come under a new entity led by RCom and it will hold 19.3 per cent of the total spectrum allocated to the industry — the highest in the country by an entity.
While the merged entity will be created through equity deal, the source confirmed that within the structure, the RCom shareholder will get three shares in the new entity against one share of RCom.
If the sale of tower business and optical fibre infrastructure is expected to bring the debt levels down by around Rs 29,000 crore, the latest announcement will result into transfer of debt amounting to Rs 10,000 crore from RCom to the new merged entity. While the debt levels of the company stand at around Rs 39,000 crore, the two deals would make the company that will be left with its enterprise business — debt-free.
“RCom has expressed interest in focusing on enterprise business while the new entity, whose brand and other details will be finalised later, will run mobile business created by using resources of RCom, Aircel and MTS,” the source said.
Following the announcement, the shares of RCom jumped by over 4 per cent before settling at Rs 85.7, a gain of 2.4 per cent.
