RCom, Aircel and Sistema in talks for a three-way merger

The ground for a greater telecom platform is settling up in India as Reliance Communication (RCom), Aircel and Sistema (MTS) are planning for a three-way merger.

As reported by The Economic Times, talks have already begun between the three companies. Under the first phase of the proposed pact, MTS could be merged into RCom through share-swap arrangement. The second phase will involve Aircel.

The first phase of the deal is in the advanced stage of conversations while the second phase is at a preliminary stage, the business daily revealed.

As per an official, Maxis-owned company and RCom are planning to sell assets to reduce their debts. The official, however, was referring to RCom's move to sell stakes in its tower and overseas businesses, besides monetising its land holdings to trim its over Rs 38,000-crore debt.

Aircel is also in conversation to sell its 4G airwaves to market leader Bharti Airtel, and use the same money to reduce its debt of Rs 20,000 crore.

However, no official statement has yet been issued by either of the companies.

Officials aware of the matter also informed ET that RCom and Aircel were exploring sharing and trading pacts for the five circles, wherein the former didn't win back 900 Mhz airwaves during the auctions that took place recently.

Industry experts also say that if the three-way merger worked out, it’ll result in Aircel's owner Maxis becoming the largest shareholder with 35-40% stake. Aircel, which is 74% owned by Maxis, will also bring in its infrastructure for the deal.

Bankers, aware of the development say that RCom and Aircel, both are saddled with high debts which must be resolved before the merger.

According to the latest figures available, Aircel’s debt is around Rs 20,000 crore, while RCom reported a debt of nearly Rs 38,595 crore.

As per the media report, none of the networks – Aircel, RCom – independently are likely to achieve high profitability. But the three-way merger will create the country's third-largest telco after Airtel and Vodafone. It will also enable the combined entity to leverage size and synergies to enhance profitability.
Image: indiatimes