Rcom Acquires MTS in an All-Stock Deal Valued At Rs 5,000 Crore

DELHI, India - Nov. 10, 2015 - PRLog -- In an important sector development, the Anil Ambani-led Reliance Communications has cleared the grounds for acquisition of the Indian arm of the Russian conglomerate Sistema, Sistema Shyam Teleservices Ltd (SSTL), which operates in India under the brand name MTS.

While the exact details of the merger are yet being worked out, RCom has confirmed that SSTL will hold a 10 percent equity stake in RCom , whilie it will take up SSTL’s spectrum liabilities amounting to Rs 392 crore per annum for the next 10 years. The merger will be formalized through an all-stock deal worth Rs 4,500-5000 crore.

The deal will add approximately 9 million new customers and scale up RCom’s annual revenues by nearly Rs 1,500 crore. More importantly, RCom will acquire SSTL’s 800/850 MHz band spectrum--believed to be the most valuable and effective spectrum band for 4G LTE services.  This will be a big push to RCom’s unique nationwide footprint of minimum 5 MHz contiguous 800/850 MHz spectrum aggregating 148.75 MHz.

The acquisition will boost RCom’s presence in 800/ 850 MHz band in 8 important circles by a period of 12 years from 2021 till 2033 (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal).

An official release states that SSTL intends to pay off its accrued debts before formalizing the deal.  Talks about the deal had been doing the rounds since June, when RCom had given the first signs to BSE about ongoing talks without confirming it officially.

Sistema is a Russian business conglomerate of Vladimir Yevtushenkov which kick started their Indian telecom venture back in 2007 by buying a 10% stake in Shyam Telelink for $11.4 million.

They named their Indian venture Sistema Shyam Teleservices where Sistema held an ownership stake of 56.68%, Russian Govt. 17.14%, Shyam Group 23.98% and the rest were all small investors. SSTL offered MTS brand of wireless communication services across 9 telecom circle in India.

Shares of Reliance Communications spiked nearly 4% following the announcement to hit a high of Rs 78.20 on BSE as the markets respond favorably to the development.