MTS merges with RCom in all share deal

As a result of the merger, SSTL will acquire 10 per cent equity stake in RCom. RCom will also assume the liability to pay the telecom department installments for SSTL’s spectrum, amounting to Rs 392 crore per annum for the next 10 years. Post closing of the deal, minority investors of SSTL will be given an option to exchange their shares in SSTL with the pro-rata RCom shares held by SSTL.

SSTL offers mobile telephony services under MTS brand in the country. Sistema’s plans for India had gone haywire after Supreme Court in 2012 cancelled MTS’s 21 licences due to allegations of corruption in allocation of spectrum in 2008 by former telecom minister A Raja. After this the company had scaled down its operation to just nine circles as it suffered losses from SC’s judgement. RCom will acquire additional nine million customers and Rs 1,500 crore of annual revenues due to the merger.

“In addition, RCom will acquire SSTL’s superior 800/850 MHz band spectrum, ideally suited for 4G LTE services, to complement its own nation-wide footprint of minimum five MHz contiguous 800/850 MHz spectrum aggregating 148.75 MHz,” said RCom. This will extend the validity of Rcom’s spectrum in 800/850 MHz band in eight circles by a period of 12 years from 2021 till 2033, it said.

Prior to closing of the transaction, SSTL intends to pay off its existing debt. “An appropriate payment / earn-out mechanism has been agreed in relation to disputed spectrum contiguity charges claimed by telecom department,” said RCom.

“The combination of our wireless businesses, through the demerger of SSTL wireless business into RCom for stock consideration, will generate significant capex and opex synergies for mutual benefit. The Indian data market is witnessing explosive growth, and SSTL’s proven strengths in that space will further enhance RCom’s capabilities in delivering a superior experience to our customers,” said Gurdeep Singh, president and CEO (consumer business), Reliance Communications.