Reliance Communications (RCom) is in talks with shareholders of telecom operator Aircel for a potential merger of the wireless or mobile businesses of the two companies.
The Anil Ambani-led telecom company said, "It has entered into a 90-day exclusivity period with Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited, the shareholders of Aircel Limited, to consider the potential combination of the Indian wireless businesses of RCom and Aircel."
RCom is already in the process of merging Indian mobile telephony business of Sistema Shyam Teleservices under MTS brand.
According to sources, the proposal on the table includes operation of mobile business of three companies - RCom, MTS and Aircel, under a new entity led by RCom.
The merged entity will be created through equity deal where RCom's shareholders are looking for three shares against each held by them.
The current debt of RCom, estimated to be around Rs 10,000 crore, will be transferred to this new entity and the company will become free of debt, sources said.
"RCom has expressed interest in focusing on enterprise business while the new entity, whose brand and other details will be finalised later, will run mobile business created by using resources of RCom, Aircel and MTS," they said.
The combination of RCom, Aircel, MTS wireless businesses will hold 19.3 per cent of the total spectrum allocated to the the industry - the highest in the country by an entity.
The new entity, which is in the works, will hold spectrum across all allocated bands -- 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz and 2300 MHz -- for 2G, 3G and 4G services.
"With merger of MTS and Aircel, Reliance Communications will become a formidable entity with approximately 200 million subscribers. Furthermore, with spectrum consolidation, it can plan its longer term business strategy better," Gartner Research Director Amresh Nandan said.
"It will allow them (RCom) to target high-end services on mobile broadband and business-centric mobility solutions."
RCom said the idea of potential combination of business with Aircel is to mutually derive expected substantial benefits of in-country consolidation, including operating expenditure (opex) and capital expenditure (capex) synergies and revenue enhancement.
"The discussions are non-binding in nature. Any transaction will be subject to due diligence, definitive documentation and regulatory, shareholders' and other third-party approvals. Hence, there is no certainty that any transaction will result," the company said.
The potential combination will exclude RCom's towers and optical fibre infrastructure, for which RCom is proceeding with an asset sale, as announced on December 4, 2015.
On December 4, RCom said it had signed a non-binding pact to sell its cellular towers to private equity firm Tillman Global Holdings LLC and TPG Asia Inc in an estimated Rs 30,000-crore deal to pare debt.
The stock of RCom closed at 85.70, up 2.39 per cent, on BSE today.
