RCom acquires Sistema’s India unit in all-stock deal

Highlights

eliance Communications (RCom), India\'s fourth-largest telecom operator, on Monday announced buyout of Russian conglomerate Sistema\'s Indian telecom unit in an all-stock deal. Sistema Shyam Teleservices Ltd (SSTL) will hold about 10 per cent stake in RCom and pay off its existing debt before closing the deal.

New Delhi : Reliance Communications (RCom), India's fourth-largest telecom operator, on Monday announced buyout of Russian conglomerate Sistema's Indian telecom unit in an all-stock deal. Sistema Shyam Teleservices Ltd (SSTL) will hold about 10 per cent stake in RCom and pay off its existing debt before closing the deal.

Russian tycoon Vladimir Evtushenkov-controlled AFK Sistema currently holds 56.68 per cent stake in SSTL while Russian government owns 17.14 per cent interest. Shyam Group has 23.98 per cent stake and the rest is owned by small investors.

SSTL offers mobile telephony services under MTS brand across nine telecom circles in the country. "RCom will acquire approximately 9 million customers and approximately Rs 1,500 crore of annual revenues by virtue of the transaction," the company said in a statement.

The deal will give RCom access to spectrum or airwaves in the 850 Mhz band which can be used for 4G services that it plans to start by the year-end. Also, it will be able to extend the validity of its licence by 12 years in eight high revenue generating circles of Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal.

While SSTL will pay off its existing debt, RCom will assume the liability to pay the government installments for SSTL's spectrum, amounting to Rs 392 crore per annum for the next 10 years. Sistema had ventured into Indian telecom space in 2007 when he bought 10 per cent stake in Shyam Telelink by paying $11.4 million. The stake was raised subsequently.

Once the deal is approved by the government, RCom will be able to future-proof almost half of the existing telecom circles, where most of its licences are expiring in the next few years.

On the other hand, Sistema had bought licence in 8 telecom circles like Delhi NCR in 2013 and are valid till 2033. SSTL is stated to have a debt and liability of Rs 3,200 crore. SSTL has the option to pumping in more money to raise its stake in RCom to 50 per cent to help avoid the company from taking further debts.

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