India’s Department of Telecommunications (DoT) has approved the demerger of the wireless operations of Russian-owned Sistema Shyam TeleServices Limited (SSTL) into Reliance Communications (RCOM), finally clearing the long-awaited deal to proceed. RCOM confirmed the development in a press release, adding that it expects to close the transaction by early November. Under the deal, SSTL will transfer its wireless operations to RCOM in exchange for a 10% equity stake in the enlarged company. Through the merger RCOM will gain roughly two million subscribers and additional annual turnover of around INR7 billion (USD107 million). In addition, RCOM will take on SSTL’s spectrum portfolio, comprising 30MHz in the 800MHz range and thereby extend the validity of its 800MHz concessions in eight circles – Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, Uttar Pradesh West and West Bengal – by twelve years, from 2021 to 2033. RCOM will, however, also be liable for the remaining spectrum payments to the DoT, totalling INR3.9 billion per year for the next eight years.
Whilst the consolidation will help shore up RCOM’s worsening position in India’s extremely competitive wireless market, it will do little to soften the blow of losing out on the other side of its three-way merger plan. The cellco had also planned to combine its operations with those of Aircel, to form ‘Aircom’ – the merged operator would control around 15% of the segment and rank third behind Bharti Airtel and a merged Idea Cellular/Vodafone – but the deal was scrapped earlier this month amidst regulatory uncertainty. RCOM had been banking on the transaction to help reduce its debt burden from its current level of around INR450 billion. Making matters worse for the group, the Financial Express reports that RCOM will also close down its direct-to-home (DTH) TV service when its licence expires on 18 November, having failed to find a buyer for the business.