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The RCom-Aircel merger and stake sale in the telecom tower business are crucial for Reliance Communications to pare its debt at a time when the entire telecom sector’s profits are being squeezed by Reliance Jio. Photo: Hemant Mishra/Mint
The RCom-Aircel merger and stake sale in the telecom tower business are crucial for Reliance Communications to pare its debt at a time when the entire telecom sector’s profits are being squeezed by Reliance Jio. Photo: Hemant Mishra/Mint

NCLT admits Reliance Communications’s petition for Aircel merger

Apart from the RCom-Aircel merger petition, NCLT has also admitted Reliance Communications's petition for 51% stake sale in telecom tower business to Brookfield Infrastructure

Mumbai: The National Company Law Tribunal (NCLT) on Monday admitted Reliance Communications Ltd (RCom)’s petition for merging its wireless division with telecom firm Aircel Ltd. The tribunal has also admitted RCom’s petition for a 51% stake sale in its telecom tower arm to Canada-based Brookfield Infrastructure. The tribunal will issue final orders on 13 September.

Shares of RCom rose as high as 18.80% during the day; they ended at Rs24.10, up 16.14% from the previous close.

The spin-off and merger of its wireless division along with strategic stake sale in tower business is crucial for the Anil Ambani-led firm to pare its debt at a time when the entire telecom industry’s profits is being squeezed by the aggressive pricing policies of new entrant Reliance Jio Infocomm Ltd (owned by Mukesh Ambani’s Reliance Industries).

RCom expects to net Rs11,000 crore from the stake sale in tower assets and a transfer of Rs14,000 crore of debt to the merged entity. Together, this will cut the firm’s nearly Rs45,000 crore debt by 40%.

A spokesperson for RCom declined to comment as the matter is sub-judice.

The company needs to complete these transactions by December. In early June, RCom’s creditors allowed the company to postpone debt servicing payments till December after it presented this restructuring plan. In this standstill period, banks will not convert debt they are owed into equity and the company’s debt will be classified as standard debt in the books of lenders.

The merger has already been approved by the Securities and Exchange Board of India, the Competition Commission of India and the stock exchanges. Some of RCom’s creditors such as China Development Bank who had earlier objected to the deal as it was not presented to them before being filed with the tribunal have also given a conditional consent to the deal.

However, in an affidavit filed at the tribunal, the telecom department said the Supreme Court had restrained Aircel from selling and trading 2G spectrum allotted to it in 2006 in a 6 January order. At that time, RCom told the tribunal it had already submitted the proposed scheme of arrangement to the Supreme Court and the court has so far not raised any objection or issued observations.

Separately, Swedish network provider Ericsson had filed an objection to the proposed merger deal citing dues of about Rs1,100 crore recoverable from Aircel.

“The merger will reduce debt in RCom. As with any merger transaction, this deal if it goes smoothly, is expected to reduce costs for the merged entity," said Harsh Jagnani, vice-president at ratings agency Icra Ltd.

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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