RCOM and Maxis consolidation to provide synergies of scale

Reliance Communications (RCOM), India's leading fully-integrated telecom service provider and Maxis Communications Berhad (MCB), promoters of Aircel, a leading pan-India mobile operator has merged their Indian wireless businesses to create the largest-ever consolidation in the Indian telecom.

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 3 operators in India by revenues in 12 important circles. The MergedCo will have the second-largest spectrum holding amongst all operators, aggregating 448 MHz across the 850, 900, 1800 and 2,100 MHz bands, and will enjoy enhanced business continuity through extended validity of spectrum holdings till 2033-35.

RCOM and Aircel Merged Entity second-largest spectrum holding aggregating 448 MHz across all spectrum bands Asset base of over Rs 65,000 Cr and net worth of Rs 35,000 Cr Combination will be clearly ranked amongst India’s top 4 telcos by customer base and revenues Source: RCOM

The combined entity will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with an NPV of around Rs 20,000 crore.

Speaking on RCOM and Aircel merger, Prashant Singhal, global telecom leader, EY said, "In a fragmented telecom market, the much awaited consolidation was imminent. India is the only telecom market in the world sustaining over six players with a market size of $40 billion. Given the financial situation and spate of developments the sector has witnessed in past 12 months; consolidation will help telcos leverage on the synergies and drive profitability. We expect further consolidation in the market." Anil D Ambani, chairman, Reliance Group, said, "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."

MCB commented, "This deal further reinforces MCB's commitment to India. Since acquiring Aircel in 2006, MCB has invested in excess of Rs 35,000 crore into Aircel, making this one of the largest foreign investments into India, not only in the telecom industry but across all sectors. The magnitude of this investment, and the further equity commitment in support of this deal, are underpinned by MCB's belief in the long term growth potential of both India and the Indian telecom sector."

MergedCo will be one of India’s largest private sector companies, with an asset base of over Rs 65,000 crore and net worth of Rs 35,000 crore.

RCOM and MCB will each hold a 50 per cent stake in the merged entity, with equal representation on the board of directors and all committees. The company will be managed by an independent professional team under the supervision of the board.

RCOM's overall debt will reduce by Rs 20,000 crore or over 40 per cent of its total debt, and Aircel’s debt will reduce by Rs 4,000 crore, upon completion of the transaction in 2017.

On consummation of the merger, RCOM and MCB are committed to additional equity infusion into MergedCo to further strengthen the balance sheet, fund future growth plans, and enhance financial flexibility. Both parties are already in talks with leading international investors in this regard.