Indian operators Reliance Communications (RCom) and Aircel have reached a merger agreement. RCom will combine its mobile business with Aircel, and both parent companies will hold 50 percent each in the resulting entity, ET reports, citing unnamed sources directly involved in the transaction. The merged company will emerge as India's third largest mobile operator by number of customers.
The entity will have about 200 million subscribers, following Airtel's 246 million user base, and before Vodafone's 195 million and Idea's over 173 million customers. "The new structure that has been mutually decided is quite simple. The new entity will have to be rebranded and we expect to close the deal by September 30”, the source said.
The two companies, which started a 90-day period of exclusive merger talks on 22 December 2015, have designed an initial plan to form a new listed company to run their combined wireless businesses. RCom and Aircel will also each transfer INR 140 billion of debt to their wireless company instead of INR 100 billion each. Additionally, they will retain the 2,300 MHz 4G airwaves that Aircel planned to sell to Bharti Airtel, people familiar with the matter said.
According to the same source, the operators expect to obtain regulatory and court clearances for their planned merger in the next seven months. By year-end, RCom and Airtel also hope to finalise the management and leadership structure and reduce duplication such as offices, back-end technology services and sales and distribution, the source added.
The resulting entity may be listed a year after the closure of the deal, that is around September 2017, subject to market conditions. "By that time, the operational synergies would have kicked in", the source said. Following the completion of the transaction, RCom will focus on operations such as data centres, DTH TV, fibre optic connections, enterprise business and its sub-sea cable operations, "besides having a 50 percent stake in the new entity," the person said.
Booz Allen Hamilton and AT Kearney were hired to study the synergies of capital and operating expenditure of the wireless entity. "As per their report, opex synergies work out to Rs 2,500 crore annually and capex is estimated at Rs 1,000 crore annually", the source said. "Saudi Telecom, which is an existing shareholder in Maxis, will infuse Rs 4,000 crore of fresh equity into the new entity. This will bring the debt down to Rs 24,000 crore, which gives the new entity a debt-Ebitda of 4 times to begin with," the person added.
Source: http://www.telecompaper.com/news/rcom-aircel-reach-merger-agreement-report--1130761