RCom in merger talks with Sistema Shyam

Via Financial Chronicle | Jun 16, 2015

Reliance Communications (RCOM) informed BSE on Monday that it has entered into e
xclusive discussions with AFK Sistema for a potential merger between the Anil Am
bani-led group firm and Sistema Shyam TeleServices (SSTL), the company that offe
rs telecom services under the MTS brand in India. The merger, if it happens, wou
ld be through a stock swap. The discussions are indicative and non-binding in nat
ure, and remain subject to due diligence, definitive documentation and approvals
, as may be necessary. There is no certainty that any transaction will result, RC
OM said in the notification. Sistema has made the same notification on London St
ock Exchange. SSTL is a joint venture between Russia s Sistema and the Shyam group
in India. The acquisition of SSTL would give RCOM the much-needed contiguity in
spectrum across the nine circles. The spectrum in the 900MHz band was available
(in the recently concluded auctions) only because the 20-year-long licences of c
ertain telecom operators are set to expire in 2015-2016. Spectrum in the 1800MHz
band is currently non-contiguous and partially available across licensed servic
e areas, said an analyst at India Ratings and Research.
SSTL offers CDMA services
mobile telephony and mobile broadband
under the MTS br
and in India. As of March 31, the company had over 88 lakh subscribers across ni
ne circles, including Delhi, Rajasthan, Karnataka, Tamil Nadu and West Bengal. I
t had 0.9 percent share in the wireless telephony market. On the other hand, RCo
m has pan-India presence covering 21,000 cities and towns and over 4 lakh villag
es. It provides 3G services in 13 circles. The company offers both wireless and
wireline services in both GSM and CDMA platforms. As of March 31, it had 11.29 p
ercent market share and 10.94 crore subscribers. The RCom-SSTL merger will be th
e first reasonably sized merger in the telecom sector. Last February, Bharti Air
tel announced it would acquire Loop Mobile in Mumbai circle to bring together Lo
op s 2G/EDGE network and Airtel s 2G and 3G network. The deal was said to be worth a
bout Rs 700 crore. The Indian market has 12 operators in the wireless mobile tel
ephony segment with Airtel leading the pack with over 23 percent share.