New Delhi: Anil Ambani-promoted Reliance Communications (RCom) has entered into talks with Russian conglomerate Sistema to buy its Indian mobile phone operations through a stock swap.
“RCom and AFK Sistema have entered into exclusive discussions on a potential merger between the Indian telecom business of Sistema Shyam TeleServices (SSTL) and RCom through a stock swap,” said RCom in a statement.
Under the proposed deal, industry sources claim RCom will merge MTS’ India operations into itself and SSTL will be pick up a stake in RCom in return. “The contours of the deal are still being worked out.”
“RCom will not be taking on any liabilities or debt from MTS’ existing operations onto its books. The merger will mean addition of annual revenues of about Rs 2,000 crore for RCom without any financial liabilities,” sources said.
SSTL operates in nine telecom circles — Delhi, Kolkata, Rajasthan, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh (West), Kerala and West Bengal. Its licence in Rajasthan service area will come up for renewal in 2017-18. The company did not participate in March spectrum auction to buy additional spectrum for future growth.
“The merger will lead to better pricing power in the CDMA operations in these nine circles for RCom. With operational synergies, RCom is expected to derive significantly higher financial benefits from SSTL’s operations,” said industry experts.
The merger will mean acquisition of 850 band spectrum in eight circles with validity for another 18 years — till 2033 This is because SSTL acquired spectrum through auctions in 2013 with validity till 2033. It will lead to substantial reduction in RCom’s liability for liberalisation of its 850 band spectrum in these 8 circles as SSTL spectrum is liberalised.
“RCom gets valuable holding of the LTE capable sub-1GHz spectrum without any cash outflows through this merger,” said industry experts.
