Reliance Communications on Monday announced it has agreed a share swap deal that will see it take control of smaller rival Sistema Shyam Teleservices (SSTL).
Under the terms of the agreement, SSTL will be merged into RCom. Its parent company, Russia’s Sistema, will take a 10% stake in RCom.
In addition, RCom will assume SSTL’s spectrum licence fee obligations, which amount to payments of 3.92 billion rupees (€54 million) per year for the next 10 years to the Department of Telecommunications (DoT).
"The combination of our wireless businesses… will generate significant capex and opex synergies for mutual benefit," said Gurdeep Singh, CEO of RCom’s consumer business, in a statement.
He added that SSTL’s strengths in the mobile data space will prove an asset to RCom against a background of rapid growth in India.
We are pleased that the addition of SSTL’s valuable spectrum holdings in the 800 MHz-850 MHz band will strengthen RCom’s spectrum portfolio, and extend our ability to provide world class 4G LTE services to our customers in eight important circles in the country until the year 2033," he said
The deal effectively extends RCom’s 800-MHz/850-MHz licences in Delhi, Gujarat , Karnataka, Kerala, Kolkata, Tamil Nadu, UP (West) and West Bengal by 12 years, the company said.
SSTL also offers services in Rajasthan. Across its nine circles it had 8.44 million customers at the end of August, according to the latest figures from the Telecom Regulatory Authority of India (TRAI), giving it a market share of just 0.85%.
At the same date RCom had 109.95 million customers across all 22 circles and a 11.12% share of the market.
The merged entity will remain in fourth place in the market behind, leader Bharti, number two operator Vodafone, and Idea Cellular.
"Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry," said Sistema president and CEO Mikhail Shamolin.
"We are confident that SSTL’s entry into the equity capital of RCom as a strategic investor will strengthen the competitive position of the combined company and provide subscribers with superior experience by fast-tracking the growth of LTE technology in India," he said.
SSTL will pay off its existing debt before the deal closes. The firms expect to complete the transaction in the second quarter of next year.
