RCom calls off merger with Aircel as plan hits 'regulatory' wall

Reliance Communications has called off merger talks with Aircel, citing "legal and regulatory" delays and outlined an alternative plan for debt reduction by selling real estate as well as its tower and fibre business.

"Merger of mobile business of RCom and Aircel lapses with mutual consent," the Anil Ambani-led firm said in a statement.

The merger was expected to bring down RCom's total debt to around Rs20,000 crore and that of Aircel to around Rs4,000 crore.

RCom, which is reeling under a debt of about Rs46,000 crore, will now evaluate an alternative plan for its mobile business, through optimisation of its spectrum portfolio and adoption of a 4G focused mobile strategy, its board said.

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

RCom also blamed high level of competition as one of the reasons for termination of the merger talks.

The company also blamed unlimited free voice offers and "irrational pricing" by industry participants for undermining profitability of traditional 2G and 3G mobile business.

"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. As a result of the various factors aforesaid, the merger agreement has lapsed," RCom said.

RCom now plans to sell its prime real estate in Mumbai and Delhi as well as telecom tower and optic fibre assets by December to avoid lenders converting a part of their debt into equity.

The company, however, said the merger of the mobile business of Sistema Shyam Teleservices Ltd (SSTL) into RCom will be completed this month (See: Sistema to merge Indian operations with Reliance Communications).

This merger would bring to the company SSTL's valuable spectrum holdings in the 800-850 MHz band, strengthening RCom's spectrum portfolio by 30 Mhz as well as extend its spectrum validity period in 8 important circles by another 16 years to 2033.

"RCom already has the unique advantage of capital light access to India's most extensive world class nationwide 4G mobile network through spectrum sharing and ICR (intra-circle roaming) Agreements with Reliance Jio," it said.

It has spectrum across 800, 900,1800 and 2100 MHz spectrum bands aggregating 200 MHz, valued at over Rs 19,000 crore for the balance of validity period, based on last auction pricing.

"The company will evaluate opportunities for monetisation of the same through trading and sharing arrangements," the statement said.

RCom had defaulted on some of its debt obligation and has been given additional time to service its debt by lenders.