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50:50 joint venture will be country’s third-largest mobile operator, generate INR200 billion in synergies.
After months of negotiation, Reliance Communications and Aircel on Thursday finally reached a deal to merge their mobile businesses into a 50:50 joint venture, creating India’s third-largest operator by subscribers.
The merged entity, aptly-titled "MergedCo", will boast 448 MHz of spectrum across the 850 MHz, 900 MHz, 1800 MHz and 2.1 GHz bands.
According to figures from the Telecom Regulatory Authority of India (TRAI), MergedCo will have approximately 187.6 million mobile subscribers, putting it in third place behind Vodafone and ahead of Idea Cellular, which at the end of June had 199.4 million and 176.2 million subscribers respectively. Market leader Bharti Airtel remains out in front with 255.7 million subscribers; the total number of mobile subscriptions in India stands at around 1.04 billion.
Thursday’s deal has been a long time coming.
RCom entered into exclusive merger negotiations with Aircel parent, Malaysia-based Maxis Communications Berhad (MCB), in December 2015. Tie-up talks between the two have been continuing ever since, with the exclusivity period routinely extended to allow more time to hammer out a deal.
"Together with our partners, MCB, we are delighted to have take the lead in consolidation of the Indian telecom sector," said Reliance Group chairman Anil Ambani, in a statement on Thursday.
"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," he said.
Indeed, RCom expects the merger to generate capex and opex savings totalling 200 billion rupees (€2.7 billion). The deal is expected to reduce RCom’s debt by the same amount, while MCB will see its debt cut by INR40 billion (€531 million).
The company will own assets worth 650 billion rupees (€8.6 billion) and will have a net worth of INR350 billion. RCom said it will continue to offer enterprise services, and operate its fixed-line networks, data centres, and related infrastructure separately from MergedCo.
In a statement, RCom said both it and MCB will have equal representation on MergedCo’s board, and that the company will be led by "an independent professional team under the supervision of the board."
The merger is subject to shareholder and regulatory approval, and is expected to close in 2017. Upon completion, RCom said it and MCB will plough more money into MergedCo "to further strengthen the balance sheet, fund future growth plans, and enhance financial flexibility."
