RCOM gears up for merger with Sistema Shyam

The telecom sector seems to be really moving towards the consolidation mode. After the acquisition of Loop Mobile by Bharti Airtel, a deal which was later called off, Reliance Communications (RCOM) has now entered into exclusive talks with AFK Sistema for a potential merger of Sistema Shyam Teleservices (SSTL).

“RCOM and AFK Sistema have entered into exclusive discussions on a potential merger between the Indian telecom business of SSTL and RCOM through a stock swap,” the flagship company of the Reliance Group said.

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, RCOM added.

RCOM has a customer base of over 118 million including over 2.6 million individual overseas retail customers. It owns and operates the world’s largest next generation IP enabled connectivity infrastructure, comprising over 280,000 kilometers of fibre optic cable systems in India, USA, Europe, Middle East and the Asia-Pacific region.
Invested $3.6 bn

Sistema Shyam TeleServices (SSTL) is a venture involving equity participation by Sistema Joint Stock Financial Corporation of Russia, the Russian Federation and the Shyam Group of India. Sistema JSFC is the majority shareholder in the company and approximately 2.5 per cent equity stake is held by public.

Headquartered in Gurgaon, the company has already invested over $3.6 billion in expanding its telecom network across the country. The company provides telecom services under the brand MTS to over 10 million wireless subscribers including more than 1 million high speed mobile broadband customers in over 450 towns across the country. SSTL also offers a range of android smartphones from MTS MTag series priced in the range of Rs 5,499 to Rs 8,999.

As far as financials for SSTL are concerned, the company reported consolidated revenues of Rs 357.8 crore for the first quarter ended March 31, 2015, with a consolidated operating income before depreciation and amortisation (OIBDA) loss of Rs 129.7 crore.