Saturday, 21 October 2017

Regulatory red tape derails RCom/Aircel merger

By Mary Lennighan, Total Telecom
Monday 02 October 17

Telcos call off tie-up due to 'inordinate delays' in approvals process; RCom outlines further plans for debt reduction

Reliance Communications and Aircel have called off their merger plan having failed to secure the required approvals for the deal in a reasonable timeframe. "Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction," RCom said, in a statement. "…

Reliance Communications and Aircel have called off their merger plan having failed to secure the required approvals for the deal in a reasonable timeframe.

"Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction," RCom said, in a statement.

"Unprecedented competitive intensity in the Indian telecom sector, together with fresh policy directives adversely impacting bank financing for this sector, have also seriously affected industry dynamics," the telco added.

As a result, the merger agreement the pair inked over a year ago has lapsed, it explained.

After many months of talks and speculation, RCom and Aircel agreed to merge their Indian mobile businesses into a 50:50 joint venture in September 2016.

The deal would have created India's fourth largest mobile operator by subscribers, with a market share of 14.4% at the end of July, according to the latest Telecom Regulatory Authority of India (TRAI) figures. However, India's second and third-largest operators, Vodafone and Idea Cellular, are due to merge next year.

In addition to boosting the combined RCom/Aircel's market position, the deal was also designed to help both pay down debt.

RCom said the merger would enable it to reduce debt by 200 billion rupees (€2.6 billion, at current exchange rates), while Aircel parent Maxis Communications expected to slash INR40 billion from its debt burden.

In a separate announcement on Monday, RCom outlined an alternative plan for debt reduction and the future of its mobile business, which – like those of its rivals – is battling a fiercely competitive market dynamic in India.

"RCom will evaluate an alternate plan for its mobile business, through optimisation of its spectrum portfolio and adoption of a 4G-focused mobile strategy," the telco said.

It highlighted its spectrum-sharing and intra-circle roaming (ICR) agreements with Reliance Jio Infocomm and its plan to subsume Sistema Shyam Teleservices Ltd's (SSTL's) mobile business into its own; the latter deal is due to close this month, it said.

"The addition of SSTL's valuable spectrum holdings in the 800 MHz-850 MHz band will strengthen RCom's spectrum portfolio by 30 MHz, and extend the company's spectrum validity period in eight important circles in the country till the year 2033, i.e. for another 16 years," RCom said.

RCom said it has 200 MHz of aggregated spectrum across the 800-MHz, 900-MHz, 1800-MHz and 2.1-GHz bands worth in excess of INR190 billion. It will "evaluate opportunities for monetisation of the same through trading and sharing arrangements," it said.

RCom's plan also includes a focus on its domestic and overseas B2B business, which includes enterprise, carrier, data centres, and a global submarine network.

The telco also aims to continue monetising its real estate portfolio, and its tower and fibre assets.
 

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