Anil Ambani-led Reliance Communications (RCom), today signed a historical merger agreement with Maxis Communications Berhad (MCB). This merger will lead to the consolidation of two of the biggest Indian telecom giants Reliance Communications and Aircel into one big entity.
This is the biggest ever merger in the Indian telecom history and the estimated combined asset base of both these telcos is over Rs 65,000 crore ($9.7 billion). This merger will make the new entity 4th largest telco in the country in terms of revenue and consumer base. Both RCom and Aircel have 50% stakes in the new company and will have equal representation.
Both the companies said in a joint 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 Reliance Communications and Aircel have a substantial presence in the Indian market. In terms of subscribers, RCom ranks 4th with about 110 million subscribers and a market share of 9.8 percent, while Aircel is close behind at the fifth position with 84 million users and a market share of 8.5 percent. This merger will pose a great threat to telcos like Idea which is currently the 3rd largest telco in India and can also be seen as a move of solidarity against Reliance Jio.
This merger will further help both RCom and Aircel in reducing their debts. Reliance Communication will reduce its debt by over 40 percent, i.e, around Rs 20,000 crores ($3 billion), while Aircel’s debt are expected to get reduced by around Rs. 4,000 crores ($600 million) by 2017.
Anil D. Ambani, chairman, Reliance Group said on the occasion,”Together with our partners, MCB, we are delighted to have taken the lead in consolidation of the Indian telecom sector, first, with RCOM’s acquisition of the wireless business of SSTL (Sistema / MTS), and now, with the combination of our business with Aircel Ltd. in a 50:50 Joint Venture with MCB.”
This move can also be seen as a measure against the rampage caused by the arrival of Reliance Jio in the Indian market which has taken everything by storm. The effects of this merger remain to be seen and let’s see how time unfolds. Till then, stay tuned.