In one of the biggest consolidation deal in the telecom industry, Reliance Communications Ltd has agreed to merge its mobile phone services business with rival Aircel. The combination will soon create a telecom operator ranked fourth by its customer base and revenues, and three by revenues in 12 important circles.
Maxis Communications Berhad of Malaysia, which owns Aircel, and Reliance Anil Dhirubhai Ambani Group, will both own 50 per cent each in the merged entity with an equal representation on the board and committees. The merged company will be one of India's largest private sector companies, with an asset base of over £6.50 billion and net worth of £3.50 billion. It will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with a net present value of £2 billion.
The merger is seen as Anil Ambani's latest move to rebuff elder brother's aggressive Reliance Jio entry into the market. Rcom shares rose by 2.72 per cent to Rs 51.05 on the BSE following the decision. After the unification, its overall debt will reduce by £2 billion or over 40 per cent, and Aircel's debt will reduce by £400 million. However, RCom will continue to own and operate its high growth businesses in the domestic and global space, data centres, optic fibre and related telecom infrastructure, besides owning valuable real estate.
Anil Ambani, Chairman of Reliance ADAG 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, and now, with the combination of our business with Aircel in 50:50 joint venture with MCB." He added, "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."
MCB released a statement saying, "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."
