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RCom, Aircel merge to become India’s 4th-largest telecom operator

MUMBAI: Anil Ambani-controlled Reliance Communications and Aircel are merging their wireless operators to become India’s fourth-largest telecom operator with assets worth Rs 65,000 crore (Rs 650 billion).

reliance-communications-techRCom and Maxis Communications Berhad, promoters of Aircel, will own 50% each in the merged entity, with equal representation on the board and committees.

The merger comes at a time with Reliance Jio has launched its 4G service and offers voice calls free. Mobile internet is offered at a fifth of current rates.

The merged company will have the second-largest spectrum holding among all operators, aggregating 448 MHz across 850, 900, 1800 and 2100 MHz bands. It will enjoy enhanced business continuity through extended validity of spectrum holdings till 2033–35.

The transaction will reduce RCom’s debt by Rs 20,000 crore ($3 billion), while Aircel’s debt would go down by Rs 4,000 crore ($ 600 million) on closing in 2017, the two companies said.

The merged company will be one of India’s largest private sector companies, with an asset base of over Rs 65,000 crore ($9.7 billion) and net worth of Rs 35,000 crore ($5.2 billion).

Anil AmbaniSaid Reliance Group chairman Anil Ambani, “Together with our partners MCB, we are delighted to have taken the lead in consolidation of the Indian telecom sector, first, with RCom’s acquisition of the wireless business of SSTL (Sistema / MTS), and now, with the combination of our business with Aircel in a 50:50 joint venture with MCB. We expect this combination to create substantial long-term value for shareholders of both, RCOM and MCB, given the benefits of the wide-ranging spectrum portfolio and significant revenue and cost synergies.”

The deal reinforces Maxis’ commitment to India. “Since acquiring Aircel in 2006, MCB has invested in excess of Rs 35,000 crore ($5.2 billion) in Aircel, making this one of the largest foreign investments in India, not only in the telecom industry but across all sectors. 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 said in a statement.

AircelRCom 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 real estate.

On the consummation of the merger, RCom and Maxis are committed to additional equity infusion to further strengthen the balance sheet, fund future growth plans and enhance financial flexibility. Both parties are already in talks with leading international investors in this regard.

The merged company’s subscribers will have access to nationwide 4G LTE services on the sub-1 GHz band, under RCom’s existing nationwide spectrum sharing/ICR arrangements with Reliance Jio Infocomm.