Monday, 20 November 2017

RCom to close SSTL deal next week after regulatory nod

By Mary Lennighan, Total Telecom
Monday 23 October 17

Indian operator gets the green light for takeover of rival two years after it inked the deal

Reliance Communications (RCom) has received the approval of the Department of Telecommunications (DoT) for its planned acquisition of Sistema Shyam Teleservices Ltd (SSTL). As a result, it expects to close the transaction in the first week of November, RCom announced on Monday…

Reliance Communications (RCom) has received the approval of the Department of Telecommunications (DoT) for its planned acquisition of Sistema Shyam Teleservices Ltd (SSTL).

As a result, it expects to close the transaction in the first week of November, RCom announced on Monday, two years after it first detailed the merger plan.

Under the terms of the deal, RCom will acquire around 2 million customers and additional annual revenues of around 7 billion rupees (€92 million) per year, it said. When it announced the transaction in November 2015, SSTL had 8.44 million customers across nine circles, according to figures from the Telecom Regulatory Authority of India (TRAI).

SSTL is one of a number of smaller Indian operators that have found it difficult to retain customers in recent years, against a backdrop of fierce competition that was exacerbated by the launch of Reliance Jio Infocomm last year.

The real value of the deal to RCom is in SSTL's spectrum holdings though.

The telco has 30 MHz of airwaves in the 800 MHz-850 MHz band. The deal will extend the validity of RCom's spectrum licences in that band in eight circles – Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, Uttar Pradesh West, and West Bengal – by a period of 12 years, the telco said; as a result, they will run until 2033.

RCom will take responsibility for spectrum payments to the DoT for the airwaves, which stand at INR3.9 billion per year over eight years.

As RCom revealed when it brokered the deal, SSTL, owned by Russia's Sistema, will take a 10% stake in RCom, once it has subsumed SSTL's assets.

RCom had initially hoped to complete the transaction in the second quarter of 2017, but the regulatory approvals process rarely works quickly in India.

Indeed, the SSTL deal forms part of the strategic plan that RCom detailed earlier this month after regulatory red tape derailed its attempt to merge with Aircel.

The telcos called off the deal as a result of "inordinate delays" when it came to securing the required approvals for the deal, they said.

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