Business
Reliance Communications, Sistema Shyam in merger talks
Mumbai, June 15
Industrialist Anil Ambani-led
Reliance Communications on Monday said it has entered into exclusive
talks with the Russia-based Sistema for a potential merger of its Indian
arm through a stock swap. Analysts see a strategic fit between the two
compaies.
"The discussions are indicative and non-binding in
nature, and remain subject to due diligence, definitive documentation
and approvals, as may be necessary. There is no certainty that any
transaction will result," the company said in a filing with stock
exchanges.
While Reliance Communications claims a subscriber base
of more than 118 million in voice and data market with a pan-India
presence, Sistema Shyam TeleServices, the Indian arm of the Russian
group, claims 10 million across nine circles under the MTS brand.
Both are major players in the CDMA segment in India.
"This
is a welcome beginning of some kind of consolidation. Two companies
have a strategic fit. MTS has 4G spectrum that Reliance Communications
can use, which is good for it. It is sensible for both of them," Mahesh
Uppal, director of telecom consultancy firm Com First, told IANS.
"In
India we have seven-eight operators in one circle. Globally it is three
operators in a single market. Therefore, this kind of consolidation is
imminent," Rishi Tejpal, principal research analyst, Gartner, told IANS.
"In
the coming days, we will see more such mergers and acquisitions in the
telecom space in India," Tejpal said, adding such consolidations will
have a good impact on margins and bottomlines of these companies as
well.
Reliance Communications is the flagship company of the Anil
Ambani-led group. Its customer base is over 118 million, including 2.6
million individual overseas. The coverage in India spans 21,000 cities
and towns and over 400,000 villages.
It also has a 280,000-km fibre optic cable systems in India, the US, Europe, Middle East and the Asia-Pacific region.
The
Indian arm of Sistema is a joint venture involving equity participation
by Sistema of Russia, the Russian Federation and the Shyam Group of
India. Sistema is the majority shareholder in the company which operates
its telecom services under the MTS brand.
Earlier this month,
Sistema Shyam said its non-voice revenues continued to grow at
double-digits growth and increased 11.1 percent during the first quarter
of 2015. The data card subscriber base for the quarter was up 9.4
percent at 1.8 million subscribers.