In a move that could intensify competition in the telecom sector, Reliance Communications (RCom) will merge its wireless business with Aircel to create the country’s third-largest mobile operator by subscriber base.
The creation of the new entity will first involve RCom demerging its existing cellular business, which has around 100 million subscribers. Other businesses, including tower assets and fixed-line enterprise units will continue to remain with RCom. The wireless unit will then be merged with Aircel.
RCom and Aircel’s Malaysia-based promoters Maxis Communications Berhad will hold 50 per cent each in the venture, with equal representation on the board. RCom had earlier merged with Sistema JSFC’s Indian operations — MTS — under which the Russian company holds a 10 per cent stake in RCom.
The merged entity will, however, carry a debt of nearly ₹28,000 crore — RCom and Aircel will each contribute half that amount into the debt pool.
In addition, the new operator will be liable to pay about ₹6,000 crore to the Centre for the spectrum bought by RCom in the previous auction. The new operator will have assets worth ₹65,000 crore and a net worth of ₹35,000 crore.
Once the merger is consummated in about six months, RCom and Maxis will pump in additional equity into the company to strengthen the balance sheet, fund growth, and enhance financial flexibility. Both parties are already in talks with leading international investors in this regard.
Analysts said the consolidation between the three operators comes at a time when the sector is seeing a fierce tariff battle between newbie Reliance Jio and incumbent operators Idea, Vodafone, Airtel.
“Telecom has no space for smaller players in these circumstances. You compete or perish. But to compete you need scale and money. Individually, RCom, Aircel and MTS were perhaps losing the battle. Together they can make a match,” said an analyst.