Sistema to merge Indian operations with Reliance Communications

Reliance Communications' (RCom) has entered into an agreement to take over India telecommunications business of Sistema JSFC, a publicly-traded diversified holding company in Russia and former Soviet Republics, Commonwealth of Independent States (CIS) .

According to the agreement, Sistema Shyam TeleServices Ltd (SSTL) will demerge its telecom business and will merge it with that of RCom. Following the merger, SSTL will acquire and hold a 10-per cent stake in RCom.

Prior to the transaction, SSTL plans to pay off existing debt.

Following the completion of the transaction, RCom will assume responsibility for payment of SSTL's frequency spectrum licensing fees payable by installments to the Department of Telecommunications (DoT) of India.

''The merger of SSTL and RCom's telecom businesses is a milestone event. Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry," said Mikhail Shamolin, president and CEO of Sistema.

"We are confident that SSTL's entry into the equity capital of RCom as a strategic investor will strengthen the competitive position of the combined company and provide subscribers with superior experience by fast-tracking the growth of LTE technology in India. Moreover, we believe the completion of this transaction will serve as an example of growing business ties between Russia and India and encourage other investments between the two countries," he added.

An "appropriate" earn-out mechanism has also been agreed in relation to disputed spectrum contiguity charges claimed by the DoT, the companies said in a joint statement.

The closing of the transaction, which is expected in the second quarter of 2016, is subject to conditions and regulatory approvals.

Post closing of the deal, minority shareholders of SSTL will be given an option to exchange their shares in SSTL with the pro-rata RCom shares held by the company.

''We are delighted to welcome SSTL as a valued shareholder and partner in RCom. The combination of our wireless businesses, through the demerger of SSTL wireless business into RCom for stock consideration, will generate significant capex and opex synergies for mutual benefit. The Indian data market is witnessing explosive growth, and SSTL's proven strengths in that space will further enhance RCom's capabilities in delivering a superior experience to our valued customers," said Gurdeep Singh, President and CEO, RCom Consumer Business.

"We are pleased that the addition of SSTL's valuable spectrum holdings in the 800-850 MHz band will strengthen RCom's spectrum portfolio, and extend our ability to provide world class 4G LTE services to our customers in 8 important circles in the country till the year 2033," said Gurdeep Singh, president and chief executive, RCOM Consumer Business.