Aircel, a regional telecom operator, is India’s fifth largest GSM-based mobile service provider with a subscriber base of 65.1 million.
Reliance Communications and Aircel will have 50 percent stake in the newly formed joint venture. The board will have equal representation from the two sides. The mobile subscriber base of — MTS India, Aircel and Reliance Communications wireless — will be over 180 million customers.
The enterprise and tower business of Reliance Communications is not part of the deal.
Prashant Singhal, global telecom leader, EY, said: “India is the only telecoms market in the world sustaining over six players with a market size of $40 billion. Given the financial situation and spate of developments the sector has witnessed in past 12 months, consolidation will help telecoms leverage on the synergies and drive profitability. We expect further consolidation in the market.”
HIGHLIGHTS OF RCOM-AIRCEL DEAL
# will have more than 180 million wireless customers
# ranked amongst India’s top 4 telecoms by customer base and revenues
# top 3 operator by revenues in 12 important circles
# second-largest spectrum holding amongst all operators
# asset base of $9.7 bn and net worth of $5.2 bn
# Capex and Opex synergies with NPV of $3 bn
# RCOM will operate domestic and global enterprise biz, optic fiber
Earlier, Reliance Communications acquired MTS India in an equity swap.
As per the deal, the wireless operations of Reliance Communications will be merged with Aircel and the new entity will have a new name and new brand. The new company could also be saddled with a debt of Rs 28,000 crore, equally divided between the two groups, IANS reports.
For the promoters of the two groups, the debt will reduce by Rs 20,000 crore or over 40 percent in the case of Reliance Communications, and Rs 4,000 crore for Maxis.
“We expect this combination to create substantial, long-term value for the shareholders of both Reliance Communications and Maxis, given the benefits of wide-ranging spectrum portfolio and significant revenue and cost synergies,” said Reliance Communications Chairman Anil Ambani.
Since acquiring Aircel in 2006, Maxis has invested in excess of Rs 35,000 crore into Aircel, making this one of the largest foreign investments into India.
In November, Reliance Communications announced the takeover of the telecom business of Indo-Russian venture Sistema Shyam (brand name MTS) in a deal valued at Rs 5,000 crore ($730 million), involving both a stock-swap and payment towards spectrum.
The new entity to be formed with Aircel will have 451 MHz of spectrum pan-India – Aircel’s 187.6 MHz, MTS India’s 39.4 MHz and Reliance Communication’s 224 MHZ.
This will be the second-largest spectrum holding amongst all operators, said the company, spread over 448 MHz, 850 MHz, 900 MHz, 1,800 MHz and 2,100 MHz bands. It will enjoy enhanced business continuity through extended validity of spectrum holdings till 2033-35.
The merged company will be one of India’s largest private sector companies, with an asset base of over Rs 65,000 crore and net worth of Rs 35,000 crore.
The entity will enjoy substantial benefits of scale, driving significant revenue growth and capital expenditure and operational expenditure synergies with an NPV (net present value) of over Rs 20,000 crore.
By virtue of the earlier deal alone, Reliance Communications had a hold over spectrum across 22 circles in India for a minimum period of 15 years for 4G services, stretching up to 20 years in some circles, a source involved with the deal had then said.
IANS reported that after the merger of the wireless venture with Aircel, the residual company of the Anil Ambani Group, Reliance Communications, will continue in the enterprise and other high-margin, high-growth areas.
The group is also pursuing Brookfield Asset Management for the sale of its towers and fiber assets.