Reliance Communications Ltd. (RCOM) and Maxis Communications Berhad (MCB), promoters of Aircel Limited (Aircel), on Wednesday announced the signing of definitive documents for the merger of their Indian wireless businesses - the largest-ever consolidation in the Indian telecom sector.
The RCOM-Aircel combination will create a strong operator clearly ranked amongst India’s top 4 telcos by customer base and revenues, also ranking amongst the top 3 operators by revenues in 12 important circles.
MergedCo will have the second-largest spectrum holding amongst all operators, aggregating 448 MHz across the 850, 900, 1800 and 2100 MHz bands, and will enjoy enhanced business continuity through extended validity of spectrum holdings till 2033-35.
"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 (Sistema / MTS), and now, with the combination of our business with Aircel Ltd. in a 50:50 Joint Venture with MCB. 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," said Anil D. Ambani, Chairman, Reliance Group.
MCB commented, “This deal further reinforces MCB’s commitment to India. Since acquiring Aircel in 2006, MCB has invested in excess of INR 35,000 crore (USD 5.2 billion) into Aircel, making this one of the largest foreign investments into India, not only in the telecom industry but across all sectors. 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”.
MergedCo will be one of India’s largest private sector companies, with an asset base of over Rs. 65,000 crore (USD 9.7 billion) and net worth of Rs. 35,000 crore (USD 5.2 billion).
The combined entity will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with an NPV of ~ Rs. 20,000 crore (USD 3 billion).
RCOM and MCB will each hold a 50% stake in the merged entity (MergedCo), with equal representation on the Board of Directors and all Committees. The Company will be managed by an independent professional team under the supervision of the Board.
RCOM’s overall debt will reduce by Rs 20,000 crore (USD 3 billion) or over 40% of its total debt, and Aircel’s debt will reduce by Rs. 4,000 crore (USD 600 million), upon completion of the transaction in 2017.
RCOM will continue to own and operate its high growth businesses in the domestic and global enterprise space, Data Centers, optic fibre and related telecom infrastructure, besides owning valuable real estate.
On consummation of the merger, RCOM and MCB are committed to additional equity infusion into MergedCo to further strengthen the Balance Sheet, fund future growth plans, and enhance financial flexibility. Both parties are already in talks with leading international investors in this regard.
MergedCo’s subscribers will have access to nationwide ‘gold standard’ 4G LTE services on the sub-1 GHz band, under RCOM’s existing nation-wide spectrum sharing / ICR arrangements with Reliance Jio Infocomm.
The combined 2G, 3G and 4G networks position MergedCo for further strategic collaborations, and provide MergedCo the unique capability to offer a robust platform of services across all customer segments in all 22 telecom circles, including the mass market, leading to a superior customer experience at an affordable price point, and bringing the Internet to All in furtherance of Hon’ble Prime Minister Shri Narendra Modi’s vision of Digital India.
The transaction is subject to applicable approvals, including inter alia, shareholder and regulatory approvals, lenders’ consents, etc. Goldman Sachs, SBI Capital Markets, Standard Chartered Bank, Strategy&, A.T. Kearney, BMR Advisors, PWC, S.R. Batliboi & Co. LLP, EY, KPMG, Khaitan & Co, JSA Law, Kirkland & Ellis, and Slaughter & May are acting as Advisors for the transaction.