DoT clears Reliance Communications - Sistema Shyam merger

The Department of Telecom (DoT) has approved the merger of Sistema Shyam Teleservices with Anil Ambani-led Reliance Communications.  RCom in its filing with the BSE on Monday said: "Reliance Communications Limited (RCOM) has received the Department of Telecommunication's (DoT) approval for the demerger of the wireless business of Sistema Shyam Teleservices Limited (SSTL) into RCom." After the merger, the number of mobile operators in the country will come down to ten.
 
According to PTI, the merger was cleared by the DoT on October 20. Under the deal, all wireless business assets of SSTL will now be owned by RCom. However, MTS, the telecom services brand of SSTL, will continue its operations. Moreover, SSTL will also get 10 per cent stake in RCom.

"Rcom will acquire approximately 2 million customers and additional annual revenues of around Rs 700 crore. In addition, RCom will acquire 30 MHz of the most valuable and superior 800/850 MHz band spectrum, ideally suited for 4G LTE services, to complement its own unique nationwide footprint," the statement said.

This merger of SSTL will also extend validity of RCom's spectrum portfolio in the highly valued 800 and 850 MHz band in eight major telecom circles across the country - Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP-West and West Bengal - by a period of 12 years from 2021 to 2033. This specific spectrum is best suited for delievering 4G LTE services.

RCom has assumed the liability to pay Rs 390 crore per annum for the next eight years to the DoT which is due for specrtrum purchased by SSTL. The transactions related to the deal are expected to close by the first week of November 2017, RCom said.

The approval could be the much-needed breather for RCom, which has been battling debt and faced a failed merger deal with another telecom operator Aircel earlier this month. In October, Reliance Communications called off merger talks with Aircel, citing "legal and regulatory" delays. "Merger of mobile business of RCom and Aircel lapses with mutual consent," the Anil Ambani-led firm had said.

RCom and Aircel had signed binding agreements in September 2016 for the merger of mobile business. "Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction," RCom had said.

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