R-Com merger with rival Aircel called off

Merger called off due to legal uncertainities

The merger of Anil Ambani-owned telecom major Reliance Communications (RCom) with its peer Aircel has been called off due to regulatory delays and legal uncertainities. Now, RCom will hive off an alternate plan including monetising its spectrum bands and real estate assets.

It said, "Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction.

The merger of mobile business of RCom and Aircel lapses with mutual consent Rcom and Aircel Limited (Aircel) had signed binding agreements in September 2016 for the merger of Rcom's mobile businesses with Aircel, the company said in a filing to stock exchange.

Asset Monetization Plan

Anil Ambani -Chairman of RCom

Now, RCom will evaluate an alternate plan for its mobile business, through optimisation of its spectrum portfolio and adoption of a 4G focused mobile strategy.

The company said it also has valuable spectrum across 800/900/1800/2100 Mhz spectrum bands aggregating 200 Mhz, valued at over Rs 190 billion for the balance of validity period, based on last auction pricing. RCom "will evaluate opportunities for monetization of the same through trading and sharing arrangements".

Doubts on company's ability to repay debts

The collapsed deal raises further doubts about the company’s ability to repay debt, the head of an institutional investor in RCom told Reuters, declining to be identified.

This also comes after Ericsson India has filed a petition against RCom in mid-September under the Insolvency and Bankruptcy Code (IBC) to recover Rs 4.91 billion from the company.

The merger with Aircel and sale of its tower unit to Brookfield would have brought down RComs debt by Rs 250 billion, or 60 percent of the total debt which stands at Rs 473.32 billion.

RCom had said that bankers agreed to give seven months extension till December this year under the Reserve Bank of India's Strategic Debt Restructuring (SDR) plan.

Decline in Stock Price

Worries over the company's ability to repay debt have led to a series of downgrades by ratings agencies and the company’s stock has plummeted nearly 44 percent so far this year, compared with a nearly 20 percent rise of a broader Mumbai market.

Standstill

RCom says it will continue to be under a standstill period till December 2018 and expects to complete the SDR process as per applicable guidelines.

Shareholders of the company at the Annual General Meeting held on September 26, 2017 have already approved issuance of equity shares to lenders by conversion of loans.