 "A customer leaves a Reliance communications store in Ahmedabad")
“We wish to inform you that we have received observation letters from BSE and NSE. The company and SSTL are proceeding to file necessary applications with the Bombay High Court and Rajasthan High Court, respectively, for approval of the scheme,” RCom said in a BSE filing.
After the approval from the courts, RCom will approach the department of telecommunications for rearrangement of licences. In November, RCom had announced acquisition of Sistema’s Indian telecom unit in an all-stock deal. After the deal, the entity will have 118 million subscribers. According to the deal, SSTL will hold about 10 per cent stake in RCom and pay off its existing debt before closing the deal.
According to sources, RCom shareholders will receive free listed shares in the new combined wireless entity.
In December, RCom also signed a non-binding pact to sell its tower assets and related infrastructure business to private equity firm TPG Asia and Tillman Global Holdings. Independent estimates valued the size of the deal to be Rs 20,000-22,000 crore. Both parties have entered into an exclusivity agreement that was to be valid till January 15.
Post the tower deal, the Rs 10,000-crore debt of RCom will be transferred to separate listed combined entity, once formed.
The MTS deal will give RCom access to spectrum or airwaves in the 850 MHz band, which can be used for fourth generation (4G) services.
RCom's spectrum in the 800-MHz band expires in 2021 and the merger extends the validity in the 800/850 MHz band in eight circles — Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, Uttar Pradesh (West) and West Bengal — by 12 years till 2033. SSTL’s airwaves in the 800/850- MHz band are ideally suited for 4G LTE services. RCom will also acquire its nine million customers and Rs 1,500 crore in annual revenue by virtue of the transaction. In December, RCom had announced discussions with another telecom operator Aircel for a possible merger. Aircel has 2G operations across 19 circles, not including the Kolkata, Delhi, Mumbai and Chennai metros. It has 3G spectrum in 13 circles and 4G spectrum in eight circles and has 84 million users.
Post a three-way merger, RCom could emerge as the second-largest telecom operator in terms of subscribers, after Sunil Mittal’s Bharti Airtel.
The highly competitive telecom sector has about 12 players. With reducing margins, telcos are looking to acquire smaller players to bolster their spectrum holdings and improve network capabilities. The industry is moving towards a five plus one model, where there will be five private operators and government-owned BSNL. With the entry of Jio, the smaller players, who cannot scale, will have to merge into others if they have to compete.
Given that clearances are very difficult to come by, the sector may see consolidation through mergers rather than acquisitions. Of late, RCom has been looking to sell off its assets, aiming to reduce its high debt, which stood at Rs 39,800 crore at the end of the September quarter.
Post all the deals, RCom plans to focus on its enterprise and global fibre network in the country, people close to the development said. A scheme of arrangement is a court-approved agreement between a company and its shareholders/ creditors.
RCom's stocks were down 1.14 per cent and stood at Rs 77.95 at BSE on Thursday.
WHAT’S IN STORE
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RCom to buy SSTL in all-stock deal, entity to have total 118 mn users
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RCom to buy its 9 mn customers and Rs 1,500 cr in revenue of SSTL by virtue of the deal
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SSTL will hold about 10% stake in RCom and pay off existing debt before closing the deal
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Deal to give RCom access to spectrum in the 850-Mhz band, used for 4G services
- RCom shareholders to get free listed shares in new combined wireless entity
