Reliance Communications (RCOM) will buy Russian conglomerate Sistema's
Indian wireless business, operating under the MTS brand, in an all-stock
deal, bringing an end to months of negotiations. This will be the first
major M&A transaction in the wireless sector in recent years.
As
part of the deal, Sistema's local arm will own a 10% stake in RCOM,
which is listed on the BSE and the NSE.At Monday's close of trade,
Sistema's 10% stake was worth about $300 million.RCOM, part of the Anil
Ambani group, will also assume
the liability for Sistema's spectrum payment to the government amounting
to Rs 392 crore for the next 10 years, it said in a statement.
The move will allow RCOM to expand its presence in the world's
second-largest wireless market that is expec
ted to grow rapidly on the back of 4G (fourth-generation) services'
rollout and rising demand for data services. Sistema is a relatively
small player in the highly competitive Indian telecom space with
approximately 9 million subscribers, while
RCOM is the fourth largest carrier with over 118 million customers.
The crown jewel in the deal is Sistema's spectrum holdings in the
800-850MHz band that will strengthen RCOM's mobile airwaves portfolio
and aid in providing 4G services to customers in eight key circles till
2033.Data services contributes about 60% to Sistema India's Rs
1,500-crore revenues.
The deal, subject to regulatory review, is
expected to close in the second quarter of 2016, RCOM said. Prior to the
closing of the transaction, Sistema intends to pay off its existing
debt, which is estimated to be about $500 million.
