Indian telco Reliance Communications (RCom) has won approval from the country’s competition commission to acquire smaller rival Sistema Shyam Teleservices, the buyer said in a stock exchange filing. RCom is planning a three-way merger with SSTL and Aircel, however the deal with the latter could be in jeopardy.
Indian telco Reliance Communications (NSE:RCOM) has won approval from the country’s competition commission to acquire smaller rival Sistema Shyam Teleservices (SSTL), the buyer said in a stock exchange filing.
RCom, the country’s fourth largest mobile operator, is planning a three-way merger with SSTL and Aircel, another of the country’s smaller players. However, local reports last week said the RCom-Aircel may be in jeopardy as the two may be unable to reduce their debt to the required levels in time.
RCom reached an agreement to buy SSTL, which is controlled by Russian conglomerate Sistema (LSE:SSA), last November and, the following month, entered into a 90-day exclusivity period with Aircel shareholders Maxis Communications (MYX:6012) and Sindya Securities and Investments to consider a potential merger.
SSTL, in which the Russian government and India’s Shyam Group are also shareholders, has agreed to pay off existing debt prior to the tie-up and hold a 10% stake in the combined entity.
Following completion, which the parties have said they expect to take place in the second quarter of this year, RCom will cover SSTL’s frequency spectrum licensing.
At the time of the deal announcement, Gurdeep Singh, president and CEO of RCom’s consumer business department, described SSTL as “a valued shareholder and partner” in a combined company that would “generate significant capex and opex synergies”.
The combined group would include SSTL’s “valuable spectrum holdings” in the 800 MHz to 850 MHz band, which would strengthen RCom’s spectrum portfolio and ability to provide 4G to customers in eight important circles through the year 2033, he said.
To help cut debt, RCom entered into a non-binding agreement to sell its tower assets and related infrastructure to US firms TPG and Tillman Global Holdings (TGH) last December. On 15 January, the companies reportedly extended their exclusivity talks for a further 15 days to resolve outstanding issues. RCom CEO Vinod Sawhny said during the company’s earnings call on 25 January that he expected the deal to close within a fortnight, however, this still has not happened.
Last week, one local publication cited an anonymous analyst saying that “it does look like [the tower deal] will happen soon but there is still no word on the Aircel part of it. Until that happens, there can be no deal”.
RCom and Aircel will most likely extend talks until after the spectrum auction, set to take place as early as May or June this year, is completed, the analyst reportedly added.
A person familiar with the tower transaction, which could be worth up to Rs300bn (US$4.38bn), was cited saying it is being delayed as RCom is working on a number of other deals to reduce debt.
RCom, which had a debt pile of US$5.97bn at the end of December 2015, has said that TPG and Tillman will also look at buying its nationwide fibre optic assets in a separate transaction. Aircel’s debt reportedly totalled Rs200bn (US$2.92bn) at the end of last year.
If successful, the three-way merger would reduce the number of mobile network operators in India from 11 to nine.
