Reliance Communications to merge Sistema Shyam Teleservices with itself

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As result of the demerger, SSTL will acquire and hold a 10 per cent equity stake in RCom.

Reliance Communications (RCom) has announced that Sistema Shyam Teleservices, carried on in India under MTS brand will be merged with the Anil Ambani-led company. As result of the demerger, SSTL will acquire and hold a 10 per cent equity stake in RCom. In addition, RCom will assume the liability to pay the DoT instalments for SSTL’s spectrum, amounting to Rs 392 crore per annum for the next 10 years.

“Reliance Communications Ltd. (RCOM), one of India’s leading fully-integrated telecommunications service providers, and Sistema JSFC, a publicly-traded diversified holding company in Russia and the CIS, today announced the signing of definitive documents for demerger of Sistema’s Indian wireless business, carried on by Sistema Shyam Teleservices Ltd. (SSTL) under the MTS brand, into RCOM,” the company said in a BSE filing.

RCom will acquire around 9 million customers and around Rs 1,500 crore of annual revenues by virtue of the transaction. In addition, RCom will acquire SSTL’s most valuable and superior 800 / 850 MHz band spectrum, ideally suited for 4G LTE services, to complement its own unique nationwide footprint of minimum 5 MHz contiguous 800 / 850 MHz spectrum aggregating 148.75 MHz.

This will extend the validity of RCOM’s spectrum in 800 / 850 MHz band in 8 important circles by a period of 12 years from 2021 till 2033 (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal).

Prior to Closing of the Transaction, SSTL intends to pay off its existing debt. An appropriate payment / earn-out mechanism has been agreed in relation to disputed spectrum contiguity charges claimed by DoT.

“We are delighted to welcome Sistema Shyam TeleServices Ltd. as a valued shareholder and partner in Reliance Communications Ltd. The combination of our wireless businesses, through the demerger of SSTL wireless business into RCOM for stock consideration, will generate significant capex and opex synergies for mutual benefit,” Gurdeep Singh, president & chief executive officer, consumer business, Reliance Communications, said.

Reliance Communications Ltd share price was trading 2.86 up at Rs 77.40 in late morning trade.

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