RCom, Aircel ink big merger deal

In the largest merger ever in the Indian telecom sector, Anil Ambani-led Rel-iance Communications on Thursday agreed to merge its wireless telecom business with Maxis Commu-nication, the promoter of south India’s telecom major Aircel.

The deal would create India’s fourth biggest mobile phone operator with asset base of more than Rs 65,000 crore.

The combined entity will have 19 crore subscribers, which will overtake Idea Cellular in terms of subscription numbers. Currently, RCom is the fourth largest telecom firm with 11 crore customers, while Aircel ranks fifth with 8.4 crore subscribers.

The combined entity will have a market share of 19 per cent — RCom had 9.8 per cent market share, Aircel 8.5 per cent and Sistema, which RCom earlier merged with, had 0.7 per cent share.

According to a joint statement issued by both the companies, “The RCom-Aircel combination will create a strong operator clearly ranked amongst India's top 4 telcos by customer base and revenues, also ranking amongst the top three operators by revenues in 12 important circles.”

The major advantage that the merged entity will enjoy is that of having the second-largest spectrum holding among all operators, aggregating 448 MHz across the 850, 900, 1800 and 2100 MHz bands. This will enhance business continuity thro-ugh extended validity of spectrum till 2033-35.

The merger will reduce RCom debt by Rs 20,000 crore or over 40 per cent of total debt, and Aircel’s debt by Rs 4,000 crore.

The statement, however, added that “RCom will continue to own and operate its high growth businesses in the domestic and global enterprise space, data centres, optic fibre and related telecom infrastructure, besides owning valuable real estate.”

MTS (Sistema) will continue to hold 10 per cent stake in RCom, with no presence on the board.

Analysts, however, feel that the combined entity will be successful only if any of the partners bring in fresh cash and buy a reasonable amount of 4G spectrum as the country shifts towards high data consumption and competition from Mukesh Ambani-led Reliance Jio.