RCom & Aircel come together to create India's 4th largest telco

Anil Ambani's-led Reliance Communications and Maxis Communications Berhad, promoters of Aircel Limited, announced on Monday that both companies had signed of definitive documents to merge their respective wireless businesses. The merger would be the largest ever consolidation in the Indian telecom sector.

The RCom-Aircel combination will create a strong operator clearly ranked amongst India’s top 4 telcos by customer base and revenues, also ranking amongst the top three operators by revenues in 12 important circles. The merged entity will have the second largest spectrum holding amongst all operators, aggregating 448 MHz across the 850, 900, 1,800 and 2,100 MHz bands, and will enjoy enhanced business continuity through extended validity of spectrum holdings till 2033-35.

Commenting on the deal, Anil D Ambani, Chairman, Reliance Group, said: "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."

A statement from MCB said: “This deal further reinforces MCB’s commitment to India. Since acquiring Aircel in 2006, MCB has invested in excess of Rs 35,000 crore ($5.2 billion) into Aircel, making this one of the largest foreign investments into 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.”

The new entity 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). The combined entity will enjoy substantial benefits of scale driving significant re venue growth, and capex and opex synergies with an NPV of Rs 20,000 crore ($3 billion). RCom and MCB will each hold a 50% stake in the merged entity (“MergedCo”), with equal representation on the Board of Directors and all committees.

The company will be managed by an independent professional team under the supervision of the Board. RCom’s overall debt will reduce by Rs 20,000 crore ($3 billion) or over 40% of its total debt, and Aircel’s debt will reduce by Rs 4,000 crore ($600 million), upon completion of the transaction in 2017. RCom 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 valuable real estate.