This special goal vehicle in turn will get merged into the mobile business of Maxis Communications Bhd-owned Aircel. The establishment of the joint venture, worth Rs 35,000 crore, is the largest-ever consolidation deal in the telecom sector in India.
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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.
“We expect this combination to create substantial, long-term value for the shareholders of both Reliance Communications and Maxis (holding arm of Aircel), given the benefits of wide-ranging spectrum portfolio and significant revenue and cost synergies”, Chairman Anil Ambani said. Though the merger has been announced, it will need the approval of the Department of Telecom before the new company comes into existence.
Reliance Communications, controlled by billionaire Anil Ambani, will own half of the merged the entity, while Aircel’s parent, Malaysia’s Maxis Communications Bhd [MXSCC.UL], will own the other half, the two sides said in a joint statement.
The merger between RCom and Aircel will create a formidable entity in the Indian telecom market where competition was intensified with the entry of the Mukehsh Ambani-led Reliance Jio. “While MergedCo will run as a separate business to RCOM, it will remain a sizeable part of the wider telecommunications group and, in our view, will likely be supported by RCOM in a distress situation”, Moody’s stated.
He added the future capital expenditure (capex) expansion would be into data-led opportunities, which are at the market place. It will also reduce the debt of RCom by Rs 200 billion or over 40% of its total, and of Aircel by Rs 40 million. The combined entity is expected to amount to a total worth of Rs 65,000 crore. The standalone RCom will have a debt of around Rs 9,000 crore, after closure of the tower arm sale.
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RCom now has a 9.8 per cent market share while Aircel, which is the leading operator in Tamil Nadu and has a strong presence in the eastern states, has a 8.5 per cent share.
