Indian operators Reliance Communications (RCom), Aircel and Sistema Shyam TeleServices Limited (SSTL), which provides telecom services under the MTS brand, have started initial talks for a three-way merger that is expected to create India's third largest operator by subscribers, The Economic Times reports, citing an unnamed source directly involved in the negotiations.
As part of the first phase of the deal, MTS would merge into RCom through a share-swap arrangement. Talks for this phase are in an advanced stage, the source added. The second phase includes an agreement with Aircel. Talks for this move are in a preliminary stage and contingent on both Aircel and RCom reducing their debts, the source said.
"Both companies plan asset sales to reduce debt", the person said, referring to RCom's move to sell stakes in its tower and overseas businesses, apart from monetising its land holdings to reduce its INR 380 billion debt. Aircel is also in talks to sell its 4G airwaves to Bharti Airtel, and use the proceeds to cut its overall debt of INR 200 billion.
According to another source, RCom and Aircel are exploring sharing and trading agreements for the five circles in which RCom failed to win back 900 MHz spectrum in the recent auctions. The source also said RCom's would prefer to trade and sharespectrum. However, if the three-way merger talks fail, Aircel's owner Maxis would become the largest shareholder with a stake of 35 to 40 percent, which the Anil Ambani group would own less than 30 percent. Russia's Sistema would get less than 10 percent, with the shareholders of RCom owning the remaining stake. Anil Ambani, through entities and family members, owns nearly 60 percent of RCom.
