If Reliance Communications were to acquire MTS, its subs market share would improve by 70 bp to 13.1% and RMS to
6.5%. The potential combined market share is well within the 50% limit prescribed by the Department of Telecom for M&A. More importantly, a potential acquisition would improve RCOM?s market share rank by 1 or 2 places in 6 circles
MTS holds liberalized spectrum in 8 circles. RCOM thus would have to pay the government a discovered price only for the Rajasthan circle, as the spectrum in this circle was administratively allocated to MTS. Rajasthan is the only circle where RCOM currently has less than 5 MHz in the 800 MHz band, a circle where MTS holds 5 MHz of contiguous spectrum. If the transaction goes through, RCOM could liberalize this spectrum before offering LTE services per government guidelines. Also, the potential combined spectrum holding of RCOM and MTS in the 800 band would remain within the maximum limit of 10 MHz.
MTS had not participated in the recent spectrum auctions but its parent, Sistema, has said it has been talking to different players for business expansion.
