RCom, Aircel in talks to merge wireless biz

Thursday, Dec 24, 2015

Reliance Communications on Tuesday said it had entered into a 90-day non-binding exclusivity period with Maxis Communications Berhad and Sindya Securities and Investments, shareholders of Aircel, to consider potential combination of their Indian wireless business.

This comes a month after Reliance Communications’ announcement of a similar deal with MTS, the Indian arm of Russia’s Sistema Group, which signalled the beginning of consolidation in the telecom sector.

Reliance Communications could, after the two mergers, become the country’s second-largest telecom company by subscribers after Sunil Mittal’s Bharti Airtel. Reliance Communications is now the fourth-largest telecom company by subscribers trailing Vodafone and Idea Cellular. Aircel comes in at fifth position.

Aircel offers 2G services in 19 circles, excluding Kolkata, Delhi, Mumbai and Chennai. It has 3G spectrum for 13 circles and 4G spectrum for eight and has over 84 million users.

Large telecom companies are looking to acquire smaller rivals to add to their spectrum holdings and improve network capabilities. With the impending entry of Mukesh Ambani’s Reliance Jio and the fact that clearances are difficult to come by, the dozen-company industry may consolidate through mergers rather than acquisitions. The telecom industry is moving towards a five-plus one model, with five private companies and state-owned BSNL.

Reliance Communications has been trying to sell assets to reduce its debt, which stood at Rs 39,800 crore at the end of the September quarter. Earlier this month, the company signed a non-binding agreement to sell its cell towers and related infrastructure to private equity firms TPG Asia and Tillman Global Holdings. Independent estimates have valued the size of the deal at Rs 20,000-22,000 crore. The two sides have entered into an exclusivity agreement, valid till January 15, 2016.  In November, RCom announced merger with Sistema Shyam TeleServices’ operations with itself in an all-stock deal. Sistema will receive a 10 per cent stake in RCom once the deal, negotiated over months, goes through.  There was still some distance to be traversed in the MTS deal, however, because the $600 million spectrum liberalisation cost could be a deal breaker, sources in the know said.

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