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RCom gets CCI nod for demerger scheme

Anjana Das, New Delhi
20/03/2017   0 Comments

Reliance Communications has received an approval from the Competition Commission of India (CCI) for the proposed Scheme of Arrangement for demerger of its wireless division to merge into Aircel Limited.
 
The Company has already received approval from the BSE, NSE and SEBI for the proposed Scheme of Arrangement and filed an application with the National Company Law Tribunal (NCLT), Mumbai Bench, for approval of the said Scheme, Bureaucracy Today has learnt.
 
Post closing, the Company and the present shareholders of Aircel Limited will hold 50% each in Aircel. 
 
The merger will create the country’s third-largest mobile operator by subscriber base. Earlier Airtel acquired marginal player Telenor's  India operations in seven circles  to compete with Jio on a larger scale. Today Vodafone and Idea Cellular also announced their merger arrangements.
 
The new entity will  have only  RCom's  cellular business, which has around 100 million subscribers. Its Other businesses, including tower assets and fixed-line enterprise units, will continue to remain with RCom.  After the demerger , the RCom wireless unit will be merged with Aircel.
 
RCom and Aircel’s Malaysia-based promoter Maxis Communications Berhad  (MCB) will hold 50 per cent each in the venture. RCom had earlier merged with Russian company Sistema JSFC’s Indian operations — MTS — under which the Russian company holds a 10 per cent stake in RCom.
 
The merged entity will, however, carry a debt of nearly 28,000 crore — which both partners will share equally. RCOM and MCB to hold 50% each in the new venture with equal representation on board and committees. This transaction will reduce RCom debt by Rs 20,000 crore or over 40% of total debt. Aircel’s debt will be cut by Rs  4,000 crore on  deal closing in 2017.
 
There is an ongoing case against Maxis top officials in the Supreme Court pertaining to Aircel-Maxis deal case. But RCom feels  there would not be any impact on the the merger of its wireless business with that of Aircel . Supreme Court had said these Malaysian nationals, who have been summoned as accused in the Aircel-Maxis deal case, were not respecting the orders of the courts here and if they "don't care about the law and court's order" the apex court will deal with them.
 
RCom expects to cut down 70 percent of its debt totalling around Rs 42,000 in 2017-18 by leveraging its assets including by merger of its wireless business with that of Aircel and sales of mobile towers, Rcom had earlier stated. Recently the company signed a deal with Canadian tower major  Brookfield  to sell its tower business to cut down the debt. The deal will fetch Rs 11,000 crore in its book.
 
RCom posted its first-ever consolidated net loss for the quarter ended December 31, 2016. Last week, it reported a consolidated net loss of Rs 531 crore for October-December 2016, mainly due to free 4G services being offered by his elder brother Mukesh Ambani's Reliance Jio and exit from its profitable CDMA operations  and increase in amortisation and interest expense aggregating to Rs 278 crore on account of capitalisation of  850 MHz spectrum liberalisation fee. The company had posted net profit of Rs 303 crore in the same period a year ago.

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