Reliance Communications-Aircel merger collapses, Anil Ambani-led company cites regulatory and legal issues

The company cited delays due to regulatory and legal uncertainties and interventions by various parties as a reason to call off the merger. (Reuters)

In a big development in the telecom industry, Reliance Communications Ltd (RLCM.NS) on Sunday said that it has mutually agreed to call off a proposed merger with Aircel, Reuters reported. The company cited delays due to regulatory and legal uncertainties and interventions by various parties as a reason to call off the merger. The report says that RCom had been trying to reduce its heavy debt by 250 billion rupees by merging its wireless business with rival Aircel. The Anil Ambani-led group was also planning to sell a stake in its mobile arm to a unit of Canada’s Brookfield Asset Management (BAMa.TO), it said. RCom’s net debt stands at 443.45 billion rupees (5.17 billion pounds) at the end of March.

The decision comes days after Anil Ambani had said the telecom sector is in an “ICCU” with government and lenders most at risk. He had also warned of a monopolistic market emerging. Ambani had also promised to get RCom out of its difficulties by March 2018, saying its lenders are supportive of all its actions. Referring to the entry of his elder brother Mukesh Ambani- promoted Reliance Jio, Anil Ambani said we are “potentially” moving towards a market with limited competition and feared that it may turn into a “monopoly”.

“The wireless or mobility sector, from any dimension you look at, is in the ICCU. It is not in the general ward, it is not in the ICU, it is in the ICCU,” Ambani said at Reliance Communications’ (Rcom) annual general meeting, as per PTI. “It is a systemic threat to the government, for its revenues, it’s a systemic threat for our banking sector and it is what I call the creative destruction of a sector,” he had said.

Further inputs awaited