Indian telco Reliance Communications and smaller rival Aircel are reportedly unlikely to reduce their debt to the required levels before the exclusivity period for their planned merger expires. RCom, the country’s fourth largest mobile operator, is planning a three-way merger with Aircel and Sistema Shyam Teleservices (SSTL).
Indian telco Reliance Communications (NSE:RCOM) and smaller rival Aircel are reportedly unlikely to reduce their debt to the required levels before the exclusivity period for their planned merger expires.
RCom, the country’s fourth largest mobile operator, is planning a three-way merger with Aircel and Sistema Shyam Teleservices (SSTL), another of the country’s smallest players.
RCom reached an agreement last November to buy SSTL from Russian conglomerate Sistema and, on 22 December, entered into a 90-day exclusivity period with Aircel shareholders Maxis Communications (MYX:6012) and Sindya Securities and Investments to consider a potential merger.
The Aircel deal is, according to local media, subject to the condition that both parties reduce their debt to less than Rs100bn (US$1.46bn). This is unlikely to be met unless RCom, controlled by billionaire Anil Ambani (pictured), sells its tower assets and Aircel sells some spectrum.
RCom entered into a non-binding agreement to sell its tower assets and related infrastructure to US firms TPG andTillman 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. Just over a month later, however, this still has not happened.
Local publication Live Mint 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.