Reliance Communications & Aircel the merged wireless entity will be held jointly by RCOM and Aircel, implying that RCOM will be carving out its wireless mobile business and transferring the same to a new entity. The tower assets and optic fiber assets will remain a part of RCOM. Reports also stated that total debt of the merged entity is estimated at INR280bn. The combined wireless entity may remain unlisted initially, and RCOM is likely to have a stake in the new wireless company.
In our view, subscriber retention may not be easy as competition may attempt to churn subscribers during transition. Another key
variable impacting the profitability of the merged entity will be the per-subscriber payout to 4G entrants for use of their 4G network. Cost savings/synergy initiatives may take couple of years and will depend largely on execution.
