Sistema Shyam merges telecom business with Reliance Communications
New Delhi: Reliance Communications Ltd on Tuesday said it has completed the merger of Sistema Shyam Teleservices Ltd (SSTL), which operates under MTS brand, with the company.
The Russian conglomerate Sistema controlled SSTL gets 10% stake in RCom as part of the deal. “The Board of Directors of Reliance Communications Ltd, at its meeting held today in Mumbai, took on record the demerger of Sistema Shyam Teleservices Ltd’s telecom business in India, run under the brand name MTS, with the company,” RCom said in a statement.
The completion of SSTL business merger gives a breather to RCom which is planning to shut down its loss-making wireless telephony business by 30 November and concentrate only on 4G internet services. As part of the deal, RCom will acquire the entire telecom business of SSTL including its licences which bring along 30 MHz of spectrum in 800 and 850 MHz band, considered premium frequencies for providing 4G services.
SSTL merger will result extension of RCom’s spectrum validity in the 800 and 850 MHz band in eight telecom service area—Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP-West and West Bengal—by 12 years, from 2021 to 2033. “As a result of the demerger, SSTL will receive a 10% equity stake in the fully diluted equity share capital of RCom.
In addition, RCom will assume the liability to pay the DoT, instalments for SSTL’s spectrum, amounting to Rs390 crore per annum for the next 8 years,” the statement said. RCom is in the midst of a strategic debt restructuring, under which it has entered into a standstill agreement with banks requiring it not to pay any interest or principal till December 2018.
With Rs44,000 crore loan on its books, the company is also shutting down its direct to home television business from next month after it failed to find any buyer for the business. RCom executive director Gurdeep Singh is believed to have told employees that the company has reached a “situation where we need to call it a day on our wireless business” and this would lead to closure of “wireless business 30 days from now”. RCom has said that the company has decided to adopt a 4G-focused strategy for profitable growth of its wireless business.
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.