Reliance Communications, Aircel to merge mobile business

Reliance Communications and Aircel’s parent Malaysia’s Maxis will own half each of the merged entity


The deal will help reduce R-Com’s debt by Rs20,000 crore, or more than 40% of its total debt, while Aircel’s debt will fall by about Rs4,000 crore. Photo: Hemant Mishra/Mint
The deal will help reduce R-Com’s debt by Rs20,000 crore, or more than 40% of its total debt, while Aircel’s debt will fall by about Rs4,000 crore. Photo: Hemant Mishra/Mint

Mumbai: Anil Ambani-controlled Reliance Communications Ltd (R-Com) has signed a definitive agreement to merge its wireless business with smaller rival Aircel Ltd to create India’s third largest telecom operator by users.

The new entity will combine Reliance Communications’s wireless business and Aircel’s operations in India, including all the spectrum held by the two companies, Mumbai-based R-Com said in a statement on Wednesday.

The combined entity will have 187.64 million subscribers, narrowing the gap with market leaders Bharti Airtel Ltd (255.7 million) and Vodafone India Ltd (199.4 million).

The merger will also help Reliance Communications, which will retain all the non-wireless business, reduce its debt by Rs20,000 crore, or roughly 48% of the Rs41,362.1 crore outstanding as of 31 March. Aircel, owned by Maxis Communications Bhd, will see its debt reduce by Rs4,000 crore, upon completion of the transaction in 2017.

Both Reliance Communications and Maxis Communications will hold 50% each in the merged entity and have equal representation on the board and committees.

Once the merger is completed, Reliance Communications and Maxis will infuse additional equity into the merged company to fund growth, the statement said, adding that the two companies are already in talks with leading international investors in this regard.

Reliance Communications claimed that the merged entity will have the second largest spectrum portfolio among all telecom operators in the country in bands such as 850MHz, 900MHz, 1800MHz and 2100MHz.

Reliance Communications entered into exclusive talks with Aircel in December for a potential merger, a month after it announced that it would buy the local unit of Russia’s Sistema JSFC.

“We are delighted to have taken the lead in consolidation of the Indian telecom sector, first with R-Com’s acquisition of the wireless business of SSTL (Sistema) and now with the combination of our business with Aircel Ltd,” Anil Ambani, chairman of Reliance Group, said in the statement.

“We expect this combination to create substantial long-term value for shareholders of both R-Com and MCB (Maxis), given the benefits of the wide-ranging spectrum portfolio and significant revenue and cost synergies,” he added.

The new entity will also have capital expenditure and operational expenditure synergies with a net present value (NPV) of Rs20,000 crore, Reliance Communications said.

NPV is the difference between the present value of cash inflows and the value of cash outflows.

The transaction is subject to approvals from shareholders regulators and lenders.

Maxis said that it has invested Rs35,000 crore in India, which is one of the largest foreign investments in the country.

“The magnitude of this investment, and the further equity commitment in support of this deal, are underpinned by MCB’s belief in the long-term growth potential of both India and the Indian telecom sector,” Maxis Communication was cited as saying in the statement.

The merged company’s subscribers will have access to nationwide 4G LTE services in the sub-1GHz band, under Reliance Communications’s existing nationwide spectrum sharing and intra-circle roaming arrangements with Reliance Jio Infocomm Ltd.

Separately, Reliance Communications announced that first-quarter profit rose 5.8%.

Net profit rose to Rs54 crore for the three months ended 30 June from Rs51 crore in the same period the previous year. Total income from operations in the quarter fell 4.7% to Rs5,259 crore from Rs5,521 crore in the year-ago period.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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