Indian operator Reliance Communications (RCom) and Russia-based Sistema have signed definitive documents for the demerger of Sistema’s Indian wireless business into RCom. Sistema Shyam Teleservices (SSTL) operates in India under the MTS brand. RCom will acquire around 9 million customers and INR 15 billion of annual revenues via this transaction.
In addition, RCom will acquire MTS’ 800-850 MHz band spectrum for LTE services, to complement its own nationwide footprint of minimum 5 MHz contiguous 800-850 MHz spectrum, aggregating 148.75 MHz. This will extend the validity of RCom’s spectrum in the 800-850 MHz band in eight circles by 12 years, from 2021 until 2033. These eight circles are Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal.
As result of the demerger, MTS will acquire and hold a 10 percent equity stake in RCom. In addition, RCom will assume the liability to pay the DoT instalments for MTS spectrum, amounting to INR 3.92 billion per annum for the next 10 years. Before the completion of the transaction, MTS plans to pay off its existing debt. An appropriate payment / earn-out mechanism has been agreed in relation to disputed spectrum contiguity charges claimed by DoT.
RCom said it believes the combination of the two companies’ mobile businesses will generate significant capex and opex synergies. The transaction is scheduled for completion in the second quarter of 2016. The deal is subject to corporate, regulatory and other approvals.