Anil Ambani has new tricks up his sleeves to save his telecom business

Anil Ambani-led Reliance Communication (RCom) and Russian conglomerate Sistema on Tuesday announced that they have entered into exclusive discussions for a potential merger of their Indian telecom businesses via a stock swap. This information was revealed in an Economic Times report.

Investopedia defines that stock swap is “the exchange of one asset for another. A stock swap occurs when shareholders' ownership of the target company's shares are exchanged for shares of the acquiring company as part of a merger or acquisition. During a stock swap, each company's shares must be accurately valued in order to determine a fair swap ratio.”

Analysts believe that the possible merger with Sistema Shyam TeleServices (SSTL) can help the debt-ridden Reliance Communications get access to spectrum, as per financial daily.

"The discussions are indicative and non-binding in nature, and remain subject to due diligence, definitive documentation and approvals, as may be necessary. There is no certainty that any transaction will result," as per a statement issued by RCom.

This announcement is of extreme importance for RCom shareholders. Sudip Bandyopadhyay, president, Destimoney Securities, told ET Now, “RCom's spectrum licence will expire sometime in 2017, whereas the Sistema's licence in India, which they have paid for partially and acquired one-one and a half years back, is there for 20 years."
(Image: The Economic Times)