RCom will acquire about two million customers of Sistema Shyam and additional annual revenues of around Rs 700 cr
Reliance Communications has received the approval from Department of Telecommunications (DoT) for the merger of wireless business of Sistema Shyam Teleservices Ltd (SSTL) with itself.
RCom will acquire about two million customers of Sistema Shyam, which operates under the brand name MTS, and additional annual revenues of around Rs 700 crore, the company said in a notice to the BSE.
The company will also get an access to 30 megahertz (MHz) of the 800/850 MHz band spectrum, which is ideal for 4G LTE services, to complement its own unique nationwide footprint. This will result in the extension of the validity of RCom’s spectrum portfolio in this band in eight circles — Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP-West and West Bengal - by a period of 12 years, from 2021 to 2033.
As a result of the demerger, SSTL will receive a 10% equity stake in RCom. However, the Anil Ambani-promoted firm will have to pay Rs 390 crore per annum for next eight years to DoT as spectrum liability for acquiring the spectrum of Sistema Shyam.
The transaction is expected to close by the first week of next month. SSTL has operations in nine circles.
According to sources, the value of acquired spectrum is around Rs 7,400 crore as per latest auction prices. An equity of 10% in RCom is valued at around Rs 650 crore. Apart from 10% equity, SSTL would not get any Board seat or veto rights, sources said.
The deal between the two firms does not involve any cash flow and SSTL will pay off all its existing debt prior to the closure of the deal.
Recently, RCom called off its merger talks with Aircel over legal and regulatory hurdles. It is also in the process of selling off its mobile towers to Brookfield Infrastructure, which is expected to bring down its Rs 45,000 crore debt.
Also, Ericsson had filed for insolvency in the NCLT under the newly-formed Insolvency and Bankruptcy Code to recover Rs 1,150 crore from RCom for the supply of services and equipment. Currently, RCom is in the process of strategic debt restructuring under which banks will not collect interest till December this year.
CONSOLIDATION TIME
- RCom will acquire about two million customers of Sistema Shyam and additional annual revenues of around Rs 700 crore
- It will also get an access to 30 megahertz (MHz) of the 800/850 MHz band spectrum
- The value of acquired spectrum is around Rs 7,400 crore as per latest auction prices, sources say
- SSTL will receive a 10% equity stake in RCom, valued at around Rs 650 crore. Apart from 10% equity, SSTL would not get any Board seat or veto rights
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