Reliance Communications spikes 6% as board approves merger with Sistema's MTS

Shares of Reliance Communications surged over 6 per cent in trade on Monday after the telecom company announced the acquisition of Russian conglomerate Sistema's Indian telecom unit in an all-stock deal that will create an operator with 118 million subscribers.

The stock ended the day 6.18 per cent up at Rs 79.90 after hitting an intraday high of Rs 81.15, up 7.84 per cent on the Bombay Stock Exchange (BSE).

Sistema Shyam Teleservices Ltd (SSTL) will hold about 10% stake in RCom and pay off its existing debt before closing the deal.

SSTL offers mobile telephony services under MTS brand across nine telecom circles in the country.

"RCom will acquire approximately 9 million customers and approximately Rs 1,500 crore of annual revenues by virtue of the transaction," the company said in a statement.

The deal will give RCom access to spectrum or airwaves in the 850 Mhz band which can be used for 4G services that it plans to start by the year-end.

Also, it will be able to extend the validity of its licence by 12 years in eight high revenue generating circles of Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal.

"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," said Gurdeep Singh, president & chief executive officer, Consumer Business, RCom.