Reliance Communications (RCom) & Aircel Combine Mobile Businesses in India

Fri, October 07, 2016 / Uma S Reliance Communications (RCom) & Aircel Combine Mobile Businesses in India

The two biggest telecom operators in India Reliance Communications and Aircel are signed the agreement for merger of their businesses in the first week of September. It is the wireless operations of Reliance Communications Ltd (R-Com) and Aircel Ltd, and the RCom-Aircel combination will create a telecom operator ranked fourth through customer base and revenues and number three operator by revenues in 12 important circles.

The two companies will hold 50% share each in the merged entity with equal representation on board and committees. The merged company will create the 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 ($5.2 billion).

Chairman Anil Ambani expects this combination to create substantial, long-term value to the shareholders of both companies that Reliance Communications and Maxis (holding arm of Aircel), given the benefits of extensive spectrum portfolio and significant revenue and cost synergies. And the announcement of launching plans and offers is set to happen after the commercial launch of Jio 4G. Reliance Communications also has a pact with Reliance Jio to share some airwaves, so that Aircel will take the advantage of Reliance Jio Infocomm Ltd.’s 4G LTE network services therefore expect porting of all Aircel subscribers to the new network.

This entity will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with net present value (NPV) of Rs 20,000 crore ($3 billion). The company will be managed by an independent professional team but the supervision of the board, RCom and MCB said.

The merger transaction, which will be completed in 2017, will trim RCom's debt by Rs 20,000 crore or 40% of the total debt while Aircel will cut its debt by Rs 4,000 crore. However, RCom will be continued to own and operate its high growth businesses in the domestic, global space, data centers, optic fiber and other related telecom infrastructure, besides owning valuable real estate.