Reliance Communications’ Wireless Business To Be Merged With Aircel

Reliance Communications Ltd. will demerge its wireless business into Aircel Ltd. Following the deal, Reliance Communications and Aircel will hold 50 percent each in the new company, according to a filing on the stock exchanges. The board of the new company will have equal representation on the board of the joint venture.

Reliance Communications and Aircel will transfer Rs 14,000 crore of debt each to the joint venture, taking the total debt of the new company to Rs 28,000 crore, excluding Rs 6,000 crore of spectrum payment liability. The deal will help Reliance Communications cut its debt by Rs 20,000 crore (or 40 percent of the total debt on its books). The new company will be rebranded.

After the merger, Reliance Communications will continue to hold its enterprise, IDC, and global business. MTS will hold 10 percent stake in the company but will not have any board representation. The deal will take six months to be completed as it needs approval from various regulatory authorities including market regulator Securities and Exchange Board of India, competition regulator Competition Commission of India, and two high courts. The merged entity will have a 17 percent revenue market share – close to the market share of Idea Cellular.

The merged company will have the second-largest spectrum holding among all Indian operators.

What The Joint Entity Will Look Like

Aircel holds 187 megahertz (MHz) of spectrum across three bands of 900, 1800 and 2100 MHz in various circles. It holds 99 MHz in the 1800 MHz band, and 65 MHz in the 2100 MHz band.

In the 900 MHz band, Aircel has spectrum in four circles – Tamil Nadu & Chennai, Assam, North East and Jammu & Kashmir. This will boost Reliance Communications’ spectrum holdings in these areas as currently it does not hold spectrum in these four areas.

In the 1800 MHz band, Aircel holds 99 MHz in all 22 circles. But Madhya Pradesh, West Bengal, Himachal Pradesh, Bihar and Assam will be of special interest to Reliance Communications as it has no spectrum holdings in these circles.

In the 2100 Mhz band, Aircel holds 65 MHz in 13 circles. Andhra Pradesh, Karnataka, Tamil Nadu & Chennai, Kerala and Uttar Pradesh-East will be of special interest to Reliance Communications as it has no spectrum holdings in these circles.

Overall, Reliance Communications will exclusively benefit over 12 circles from the deal – Tamil Nadu & Chennai, Assam, North East, Jammu & Kashmir, Madhya Pradesh, West Bengal, Himachal Pradesh, Bihar, Andhra Pradesh, Karnataka, Kerala and Uttar Pradesh-East.

For financial year 2015-16, Aircel had an adjusted gross revenue of Rs 7,945.5 crore. In the first quarter of financial year 2017, adjusted gross revenues stood at Rs 1,985.8, down 1 percent compared to the corresponding quarter last year. The gross revenue stood at Rs 10,824.4 crore.

In the first quarter of financial year 2016-17, adjusted gross revenues stood at Rs 2,874.9 crore, up 6.5 percent compared to the corresponding quarter last year.