MUMBAI – In what will be the largest consolidation in India’s telecom sector, Anil Ambani-owned Reliance Communications (RCom) and Malaysia’s Maxis Communications Berhad (MCB), promoters of Aircel, have signed definitive agreements for the merger of their wireless businesses in India, creating a company with a net worth of Rs 35,000 crore and assets of Rs 65,000 crore.
The announcement comes just days after Anil’s elder brother Mukesh Ambani’s Reliance Jio launched 4G LTE services.
As a part of the deal between RCom and MCB, the wireless business of the two companies will be merged into a new company, in which RCom and MCB will each hold a half share, with equal representation on the board and committees.
The deal excludes RCom’s businesses in the enterprise space, data centre, optic fibre and related telecom infrastructure, which RCom said it will continue to own.
The merged company will hold second largest spectrum portfolio among all operators in India across 850, 900, 1,800 and 2,100 MHZ bands.
The subscribers of the merged RCom-Aircel company will also get access to 4G LTE network, under RCom’s existing nationwide spectrum sharing deal with Reliance Jio.
The merger will help RCom slash its debt by Rs 20,000 crore or about 40% of its total debt, once the deal is completed in 2017. Aircel’s debt is expected to reduce by Rs 4,000 crore.
The two companies had entered exclusive talks for potential merger of their wireless business in December 2015. Earlier this year, RCom had acquired Russian conglomerate Sistema’s Indian telecom unit – Sistema Shyam Teleservices.
“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,” said Anil Ambani, chairman of Reliance Group.
RCom and MCB will infuse additional equity into the merged company, upon consummation of the deal, and have already initiated talks international investors for the same.
MCB said it has already invested over Rs 35,000 in Aircel, since it acquired the company in 2006 and the deal with RCom further reinforces its commitment to India.
“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,” it said.
RCom shares closed up 2.7% at Rs 51.05 on the BSE on Wednesday. The announcement was made after markets closed.
