Reliance Communications merges with MTS India

rcom

Reliance Communications Ltd announced its merger with Sistema’s Indian wireless business — Sistema Shyam Teleservices Ltd or MTS, clearing the way for the launch of 4G services by the Anil Ambani-owned firm.

The move will be a challenge to Reliance Jio, which was the biggest holder of 800 MHz spectrum before this deal. With this, RCom has overtaken Jio as the holder of the biggest amount of 800 MHz 4G spectrum in India.

800 MHz 4G spectrum is considered very good because it can go inside houses and buildings, unlike other bands which are not very good for in-building use.

The Closing of the transaction is expected in the second quarter of 2016. After that, minority investors of SSTL will be given an option to exchange their shares in SSTL with the pro-rata RCOM shares held by SSTL.

RCOM will acquire approximately 9 million customers and Rs. 1,500 crore of annual revenues by virtue of the transaction.

In addition, RCOM will acquire SSTL’s most valuable and superior 800 MHz band spectrum, ideally suited for 4G LTE services, to complement its own unique nationwide footprint of minimum 5 MHz contiguous spectrum aggregating 148.75 MHz.

“This will extend the validity of RCOM’s spectrum in 800 and 850 MHz band in 8 important circles by a period of 12 years from 2021 till 2033 Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP West and West Bengal,” it said.

As result of the demerger, SSTL will acquire and hold a 10% equity stake in RCOM.

In addition, RCom will assume the liability to pay the DoT instalments for SSTL’s spectrum, amounting to Rs 392 crore per annum for the next 10 years.

Prior to Closing of the Transaction, SSTL intends to pay off its existing debt.

An appropriate payment or earn-out mechanism has been agreed in relation to disputed spectrum contiguity charges claimed by DoT, RCom said.

Mr Gurdeep Singh, President & Chief Executive Officer, Consumer Business, Reliance Communications, said, “The combination of our wireless businesses, through the demerger of SSTL wireless business into RCOM for stock consideration, will generate significant capex and opex synergies for mutual benefit. The Indian data market is witnessing explosive growth, and SSTL’s proven strengths in that space will further enhance RCOM’s capabilities in delivering a superior experience to our valued customers.

“We are pleased that the addition of SSTL’s valuable spectrum holdings in the 800 – 850 MHz band will strengthen RCOM’s spectrum portfolio, and extend our ability to provide world class 4G LTE services to our customers in 8 important circles in the country till the year 2033, he added.”

Mikhail Shamolin, President and CEO of Sistema, said, “The merger of SSTL and RCOM’s telecom businesses is a milestone event. Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry. We are confident that SSTL’s entry into the equity capital of RCOM as a strategic investor will strengthen the competitive position of the combined company and provide subscribers with superior experience by fast- tracking the growth of LTE technology in India.

Read the full statement from RCom here: rcom-sistema-mts-merger

Read the full statement from Sistema by clicking on the picture below:

sistema-rcom-merger-announcement



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