RCom, Aircel, SSTL merger likely to create strong number 4 after Airtel,Vodafone, Idea

Reliance Communications, Sistema Shyam Teleservices and Aircel together is not only likely to have a 3G footprint that is bigger than those of Vodafone and Idea Cellular, analysts say, but is also expected to have 4G presence in eight circles.

This comes after Anil Ambani-controlled RCom and Aircel on Tuesday announced exclusive 90-day merger talks to combine their wireless businesses under a newly listed Rs 35,000 crore entity, barely a month after RCom, India's fourth-largest carrier, and the Indian unit of Russia's Sistema JSFC announced an all-stock merger.

Brokerage IDFC however pointed out one problem in the setup. It said the combined wireless operations of "RCom, Sistema Shyam and Aircel would have a formidable 12 per cent revenue market share, but the debt burden of both RCom (Rs 39,900 crore) and Aircel (Rs 20k-to-24k crore range) could be a possible deal breaker."

Meanwhile, in a note to clients, Goldman Sachs said on Wednesday: "A combined entity could offer 3G services in 18 circles, launch 4G services on the 2300 MHz band in eight circles and hold 2G spectrum in 22 circles."

The US brokerage noted that the potential combine would "breach overall spectrum caps in Tamil Nadu, West Bengal and Jammu & Kashmir. Operators are not allowed to hold more than 25% of the total spectrum in a circle. People familiar with the matter said the new entity may surrender excess airwaves.”

(Image credits: BCCL)