RCom-Aircel merger deal collapses
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India’s Reliance Communications (RCom) has called off a planned merger of its wireless business with rival Aircel as a result of regulatory uncertainty and opposition from some creditors.
RCom had been planning to merge its wireless business with Aircel to create a 50:50 joint venture with Aircel parent company Maxis, in a deal aimed at reducing its debt burden by around $3 billion.
But the company announced on Sunday that its merger agreement with Aircel has now “lapsed by mutual consent” due to “legal uncertainties” and “interventions by vested interests” – referring to creditors to the company.
RCom will now have to pursue alternative methods of reducing its substantial debt burden of around 450 billion rupees ($6.8 billion).
LiveMint reports that the operator now plans a fire sale of assets ranging from spectrum to real estate as part of a plan to reduce its debt by around 250 billion rupees. This will partly involve adopting a 4G focus to allow it to monitize its existing 2G and 3G spectrum.
RCom is also planning to sell its tower business and had been seeking to fetch around 110 billion rupees from the sale, but this will need to be revised now that Aircel’s tenancies will no longer be included in the deal.
Questions & Answers
Q.Why did the RCom-Aircel merger deal collapse?
Why did the RCom-Aircel merger deal collapse?
The merger agreement lapsed by mutual consent due to regulatory uncertainty, legal uncertainties, and interventions by vested interests, specifically creditors to RCom. These issues prevented the deal from proceeding as planned.
Q.What was the primary goal of the RCom-Aircel merger for RCom?
What was the primary goal of the RCom-Aircel merger for RCom?
RCom intended for the merger to reduce its significant debt burden by approximately $3 billion. The creation of a 50:50 joint venture with Aircel parent company Maxis was central to this strategy.
Q.How does RCom now plan to reduce its debt after the merger failed?
How does RCom now plan to reduce its debt after the merger failed?
RCom now plans a 'fire sale' of assets including spectrum and real estate. It also intends to adopt a 4G focus to monetise its existing 2G and 3G spectrum, aiming to reduce debt by around 250 billion rupees.
Q.How will the collapse of the merger affect the sale of RCom's tower business?
How will the collapse of the merger affect the sale of RCom's tower business?
RCom had aimed to fetch around 110 billion rupees from selling its tower business. This figure will now need to be revised downwards as Aircel’s tenancies, originally part of the deal, are no longer included.
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