Reliance Communications first announced acquisition of MTS Sistema Shyam Teleservices and is awaiting approvals on the same and meanwhile did a 50-50 merger of wireless business with
Aircel.
The merger should allow
RCOM - Aircel, along with Jio, to emerge as a viable fourth player in the Indian telecom market. We note that RCOM's current deals with Jio allow it to effectively pool their spectrum resources and share their 4G network. The addition of Aircel
should further strengthen the spectrum portfolio ? this combine is likely to be number one or two in spectrum across all bands in all markets. The company will likely have a significant spectrum portfolio across the 850/1,800/2,100Mhz spectrum bands, which should help reduce network costs and allow for creation of significant data capacity via 3G/4G rollout.
Aircel is a small player with a 5.5% pan-India revenue market share (~30% of its revenue comes from TN circle). It has 900/1800MHz across all 22 circles and also 2100Mhz spectrum (for 3G) in 13 circles; 53% of industry revenue. The company recently had sold its 2300MHz spectrum (can be used for 4G) to Airtel. The acquisition also helps fill spectrum gaps across 4 circles where RCOM currently doesn?t possess either 900/1800MHz spectrum. In addition, RCOM?s 3G spectrum footprint improves from 45% (of industry revenue) to
79%.
The merger should have rev-share of 12% of the $29bn Indian mobile market.
Theoretically, in-market mergers tend to have high-level-of-cost synergies. However, the realised gains depend upon robust execution. Turf wars and cultural factors can delay or even deny such gains.
