The much anticipated Aircel merger deal with Reliance Communications (RCom) has officially been inked, as Aircel announced that they have signing an agreement for the merger of their Indian Wireless businesses, and becomes fourth largest consolidation ever created in the Indian telecom sector.
Maxis Communications Berhad (MCB) are the promoters of Aircel has made a merger deal with RCom in the telecom sector. While Reliance Communications Ltd has agreed to merge its mobile phone services business with smaller rival Aircel, marking the first move toward consolidation in the space and creating the country’s fourth-largest phone company in terms of customers and revenue.
With this merger, the RCom-Aircel combination will create a telecom operator ranked fourth by customer base and revenues and number three operator by revenues in 2 important circles. 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 (US$5.2 billion) deal.
The Maxis Communications Berhad of Malaysia, which owns Aircel, will hold 50% each in the merged entity with equal representation on the board and committees. The deal will enjoy a substantial benefits of scale driving significant revenue growth, and capex and opex synergies with a newt present value (NPV) of Rs. 20,000 crore (almost $3 billion). With that said, the reports also suggests that the company will be managed by an independent professional team under the supervision of the board.
“The RCOM-Aircel combination will create a strong operator clearly ranked amongst India’s top 4 telcos by customer base and revenues, also ranking amongst the top 3 operators by revenues in 12 important circles,” said RCom and MCB.
The MergedCo will have the second-largest spectrum holding almost all operators, aggregating 448 MHz across the 850, 900, 1800 and 2100 MHz bands, and will experience enhanced business continuity through extended validity of spetrum holdings till 2033-35.
Aircel is a pan-India 2G operator with 3G spectrum in 13 circles and is credited with the fastest 3G roll-out ever in the Indian telecom space. RCom has a big customer base of over 107 million, including over 2.6 million individual overseas retail consumers. After completion of the merger in 2017, RCom’s overall debt will reduce by Rs. 20,000 crores or over 40-percent of its debt, and AirCel’sdebt will go beyond Rs., 4,000 crore.
It seems RCom will continue to own and operate its high growth businesses in the domestic and global space, data centers, optic fibre and related telecom infrastructure, instaed owning valuable real estate.
After Aircel merger deal announcement, RCom shares rose by 2.72% to Rs. 51.05 on the BSE on Wednesday. Still grows beyond that after the completion.
Commenting on the merger, Anil D. Ambani, Chairman, Reliance Group, said:
Together with our partners, MCB, we are delighted to have taken the lead in consolidation of the Indian telecom sector, first, with RCOM’s acquisition of the wireless business of SSTL (Sistema / MTS), and now, with the combination of our business with Aircel Ltd. in a 50:50 Joint Venture with MCB. We expect this combination to create substantial long term value for shareholders of both, RCOM and MCB, given the benefits of the wide-ranging spectrum portfolio and significant revenue and cost synergies.
Maxis Communications Berhad (MCB), said:
This deal further reinforces MCB’s commitment to India. Since acquiring Aircel in 2006, MCB has invested in excess of INR 35,000 crore (USD 5.2 billion) into Aircel, making this one of the largest foreign investments into India, not only in the telecom industry but across all sectors. The magnitude of this investment, and the further equity commitment in support of this deal, are underpinned by MCB’s belief in the long term growth potential of both India and the Indian telecom sector.