Reliance Communications (RCom) will “evaluate an alternative plan for its mobile business” after a planned merger with Aircel fell through.
The deal was dropped due to “inordinate delays caused by legal and regulatory uncertainties”. In a statement announcing the decision, RCom also complained of “various interventions by vested interests, policy directives impacting bank financing for telecoms and changed industry dynamics”.
In announcing its new strategy, it said “unlimited free voice offers and irrational pricing by all industry participants have destroyed profitability” for traditonal 2G and 3G mobile businesses. It will now focus on the optimisation of its spectrum portfolio and adopt a “4G-focused” mobile stategy.
A separate deal between RCom and SSTL is expected to complete this month, boosting its sepctrum portfolio and extending the validity period of its holdings in eight important regions. Based on last auction pricing, this has a value of INR190 billion ($2.9 billion).
It also has “capital-light” access to “India’s most extensive nationwide 4G mobile network”, through spectrum sharing and intra-circle roaming agreements with Reliance Jio.
RCom also noted its “valuable B2B business”; said it made “good progress” in restructuring its real estate holdings; and will continue with plans to monetise its tower and fibre assets.
RCom and Aircel had been in talks since December 2015 to combine their respective wireless operations.
The deal to segregate RCom’s wireless business and then merge it with Aircel and its subsidiary Dishnet Wireless was approved by the Competition Commission of India in March.
Approval was also granted by the Securities and Exchange Board of India, Bombay Stock Exchange and National Stock Exchange of India, but still required sign-off from other bodies before final clearance was granted.
As recently as August RCom said the planned merger was on track and would lead to an INR110 billion reduction in its debt, while a sale of its tower business to Canada’s Brookfield Infrastructure Group is in the final stages of approvals and will reduce its debt by INR140 billion.
Both sales were expected to bring down the company’s debt by 60 per cent.
While an RCom-Aircel deal would have created a player with a 15 per cent market share and about 170 million subscribers, the second and third largest players Vodafone India and Idea Cellular plan to merge and Telenor will sell its Indian operation to Bharti Airtel. In addition, new entrant Reliance Jio made rapid progress in terms of building its subscriber base and now holds a 10 per cent market share.