Reliance Communications and Aircel are expected to sign agreement for merger of their businesses by the first week of September.
“Term sheet between the two companies (RCom, Aircel ) have been finalized. Definitive agreement for merger between the two companies is expected to be signed in a week or 10 days,” an industry source close to the development said.
RCom and Aircel talks, if successful, would lead to formation of third largest telecom operator in the country with subscriber base of over 196 million.
“At present no regulatory approvals are required. The process for regulatory approval will begin after RCom and Aircel sign definitive agreement. It should take around 4-6 month time to complete merger and the combined entity will be rebranded,” the source said.
The new entity, which is in the works, will hold spectrum across all allocated bands — 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz and 2300 MHz — for 2G, 3G and 4G services. On the other hand, RCom and Sistema (MTS) are in process of merger. Sistema will hold 10% stake in the new entity that will formed post its merger with RCom.
In December last, the two firms announced entering into 90-day ‘exclusivity period’ for the merger deal that will exclude RCom’s tower and optical fibre assets for which a separate sale process is ongoing.
The talks were later extended twice.
The merged entity is expected to have Rs 25,000 crore business from the first day of its operation and is estimated have EBIDTA (cash flow) Rs 7,000 crore and finance cost about Rs 3,000 crore.
“RCom and Aircel have had nil free cash flow since long time but the resultant entity is being structured in a manner to have Rs 4,000 crore free cash flow which it can use for investments in network,” the source said.
RCom’s net debt at the end of 2015-16 was Rs 41,362.1 crore. Debt of Aircel could not be ascertain. At the end of last fiscal, RCom’s consolidated revenue stood at around Rs 22,000 crore.