CCI approves Reliance's acquisition of MTS
Reliance Communications said the CCI has given approval to its deal to acquire Sistema Shyam Teleservices Ltd that operates under the MTS brand. SSTL will hold about 10 per cent stake in RCom and pay off its existing debt before closing the deal. The deal will consolidate Reliance's market position ahead of Mukesh Ambani's foray into the sector with 4G services under Reliance Jio.
Anil Ambani owned Reliance Communications was in talks with SSTL to merge with them through a stock swap. The deal would be the first major consolidation in the intensely competitive sector since 2009. RCom in a release said that the discussions were indicative and non-binding in nature. They were subject to due diligence, definitive documentation and approvals, as may be necessary.
RCom had completed the due diligence for its merger with Russia's SSTL on October 9. Both the companies would meet in early November to finalise the merger and the swap ratio. MTS and the Russian government will hold two board seats in the combined entity, according to the deal. The Anil Ambani group would hold the controlling stake in the merger.
The term originated in the business world, where due diligence is required to validate financial statements. The goal of the process is to ensure that all stakeholders associated with a financial deal have the information they need, to assess risk accurately.
RCom was considering a scheme of arrangement for the de-merger of the telecom business undertaking of SSTL into their company. The combined entity would have about 120 million subscribers, making it the fourth-largest telecom operator in the country. The deal would be very beneficial for it as it would extend the validity of 4G spectrum by 12 years.
The deal would extend the validity of RCom's spectrum in the 800/850 MHz band in 8 important circles (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal) by a period of 12 years from 2021 till 2033 .
Reliance Communications (RCom) took over Sistema Shyam Teleservices Ltd (SSTL), which operates under the MTS brand. As a result of the deal, SSTL would hold 10% equity in Reliance Communications. Reliance would acquire almost 9 million customers and approximately Rs.1,500 crore of annual revenues. It would also acquire SSTL's most valuable and superior 800/850 MHz band spectrum, ideally suited for 4G LTE services.
After RCom's merger with MTS, its shares rose to nearly 4% to hit a high of Rs.78.20 on BSE. Though the deal was cashless but it was valued at nearly Rs.5000 crore. Nitin Soni, Fitch Ratings said that the company's BB- rating would remain unaffected by the merger. He said the deal was a good move for the telecom sector.