Indian telecoms sector to be reshaped by $9.7bn merger

Reliance and Maxis are already in talks with international investors to secure an additional equity infusion into the combined business.

The wireless units of two major Indian telecoms operators, Reliance Communications and Aircel, are set to merge in the largest consolidation effort ever undertaken in the country’s telecoms industry.

The transaction will see the formation of a new telecoms player with an asset base of over 650 billion rupees ($9.7 billion; €8.63 billion) and net worth of 350 billion rupees. The combined entity is expected to rank among the country’s top four telecoms operators by customer base and revenues. It will also have India’s second-largest spectrum holding, with an extended validity of spectrum running until 2033-2035.

RCom and Maxis Communications, the parent company of Aircel, will each own 50 percent of the merged business, with equal representation on the board and committees.

The two shareholders also plan to raise fresh equity for the business to strengthen its balance sheet, fund future growth and enhance financial flexibility. “Both parties are already in talks with international investors in this regard,” said RCom in a joint statement.

The transaction, still subject to various approvals, will help RCom reduce its overall debt by 200 billion rupees, or over 40 percent of its total debt, while alleviating Aircel’s debt burden by 40 billion rupees.

RCom will continue to own and operate what it calls “high-growth businesses”, which include data centres, optic fibre and related telecom infrastructure and real estate. 

Malaysia-based Maxis acquired Aircel in 2006 and has since invested over than 350 billion rupees in the pan-India mobile operator, making it one of the largest foreign investors in India.