RCom, Aircel to combine mobile business into 50:50 venture

Anil Ambani Group telecom company Reliance Communications Ltd (RCom) will combine its wireless business with smaller rival Aircel to create the nation's fourth-biggest cellular carrier by subscribers, the companies said today,

The largest consolidation in the country's telecom sector, fuelled by rising consolidation in the world's second-biggest telecoms market, will create a mobile phone operator with asset base of more than Rs65,000 crore.

RCom and Aircel's majority owner, Malaysia's Maxis Communications Berhad (MCB), announced signing of definitive documents for the merger of their Indian wireless businesses.

RCom and Aircel will hold 50 per cent each in the new company and the board of the new company will have equal representation from the two sides.

The deal will help reduce Reliance Communication's debt by Rs20,000 crore ($3 billion), or more than 40 per cent of its total debt, while Aircel's debt will fall by about Rs4,000 crore, the companies said.

As of end-March, Reliance Communications had a net debt of Rs41,362 crore, according to latest company data. Closely-held Aircel had Rs18,500 crore of debt as of 2013, according to rating agency ICRA.

"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," Reliance Communication's chairman Ambani said in a statement.

"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 three operators by revenues in 12 important circles," both the firms said in a joint statement.

RCom is India's 4th-biggest telecom operator with almost 110 million customers, while Aircel ranks fifth with 84 million subscribers.

RCom had 9.8 per cent market share while Aircel had 8.5 per cent share. RCom had earlier merged Sistema, which had 0.7 per cent share.

The companies had entered into exclusive talks in December last year.