RCom-Aircel merger deal called off, regulatory uncertainties, vested interests blamed

Moneycontrol News

The merger of Anil Ambani-owned telecom major Reliance Communications (RCom) with its peer Aircel has been called off and the former will hive off an alternate plan including monetising its spectrum bands and real estate assets.

In a meeting with Board of Directors, RCom reviewed the ongoing strategic transformation programme, and considered alternate plans for debt reduction.

The merger of mobile business of RCom and Aircel lapses with mutual consent Rcom and Aircel Limited (Aircel) had signed binding agreements in September 2016 for the merger of Rcom's mobile businesses with Aircel, the company said in a filing to stock exchange.

It said, "Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction.

"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. The Board approved the same."

Asset Monetization Plan

Now,  RCom will evaluate an alternate plan for its mobile business, through optimisation of its spectrum portfolio and adoption of a 4G focused mobile strategy.

The company said it also has valuable spectrum across 800/900/1800/2100 Mhz spectrum bands aggregating 200 Mhz, valued at over Rs 19,000 crore for the balance of validity period, based on last auction pricing. RCom "will evaluate opportunities for monetization of the same through trading and sharing arrangements".

Additionally, the company claims to have made good progress in its monetization plans for prime real estate assets, including at Dhirubhai Ambani Knowledge City with indicated value of Rs 10,000 crore, Navi Mumbai admeasuring nearly 125 acres, with development rights of potentially over 17 million sq. ft. and prime property near Connaught Place, New Delhi admeasuring nearly 4 acres.

This also comes after Ericsson India has filed a petition against RCom in mid-September under the Insolvency and Bankruptcy Code (IBC) to recover Rs 491.41 crore from the company.

The merger with Aircel and sale of its tower unit to Brookfield would have brought down RCom’s debt by Rs 25,000 crore, or 60 percent of the total debt which stands at Rs 47,332 crore.

RCom had said that bankers agreed to give seven months extension till December this year under the Reserve Bank of India's Strategic Debt Restructuring (SDR) plan.

Tower and Fiber Monetization

The company will continue to implement its plans for monetisation of its Tower and Fiber assets, as already announced, it said.

Standstill

RCom says it will continue to be under a standstill period till December 2018 and expects to complete the SDR process as per applicable guidelines.

Shareholders of the company at the Annual General Meeting held on September 26, 2017 have already approved issuance of equity shares to lenders by conversion of loans.