It’s official, it’s not happening! After facing more delays in getting approval from courts and telecom authorities, Reliance Communications (RCom) merger with Aircel has collapsed.
Touted as one of the largest ever consolidation deal in Indian telecom sector, RCom and Aircel had signed binding agreements in September 2016 for the merger of RCom’s mobile businesses with Aircel. But with Supreme Court still looking up a 2005 case on Aircel’s acquisition by Maxis, Department of Telecom (DoT) denied permission for the merger. Even creditors including Ericsson, Indus Towers and China Development Bank strongly objected the merger at the National Corporate Law Tribunal (NCLT).
“The unprecedented competitive intensity in the Indian telecom sector, together with fresh policy directives adversely impacting bank financing for this sector, have also seriously affected industry dynamics. As a result of the various factors aforesaid, the merger agreement has lapsed. The Board approved the same” said RCom in a statement.
What’s next for RCom?
RCom’s earlier merger with Shyam Sistema is expected to be completed this month. The addition of Shyam Sistema spectrum holding in the 800-850 megahertz (MHz) band would strengthen RCom’s portfolio by 30 Mhz. This will also extend operators spectrum validity period in eight important circles in the country till 2033.
The board of directors has decided that RCom would evaluate an alternate plan for its mobile business. That’s by further optimising its spectrum portfolio. RCom already has spectrum across the 800 Mhz, 900 Mhz, 1,800 Mhz and 2,100 Mhz spectrum bands, aggregating 200 Mhz. The company will evaluate opportunities for monetization of the same through trading and sharing arrangements. The company is also looking to adopt a 4G-focused mobile strategy.
“RCom already has the unique advantage of capital light access to India’s most extensive world-class nationwide 4G mobile network through spectrum sharing and ICR Agreements with Reliance Jio,” said RCom in a statement.
Further, to strengthen its financials and reduce debts, RCom would also sell real estate worth Rs 10,000 crore. As on March 2017, the telecom operator’s loan were more than Rs 45,733 crore. It has signed a deal with Indian banks, where the lenders had agreed to convert part of their loans into equity.
What’s next for Aircel?
Aircel is looking to start an independent debt restructuring programme (SDR), as it has a debt of over Rs 20,000 crore.
The operator plans what Telenor couldn’t achieve, a smaller but profitable operation as a niche player in a limited number of telecom circles. The operator’s South Indian operations and some telecom circles in North are already generating profit at an operating level.