Reliance Communications and Russian-based Sistema JFC, today announced the signing of definitive documents for demerging Sistema’s Indian wireless business carried by Sistema Shyam, under the MTS brand.
RCOM will acquire an approximate of Rs. 1,500 crore in annual revenues with this deal. 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).
As result of the demerger, SSTL will acquire and hold a 10% 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.
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.
“The merger of SSTL and RCOM’s telecom businesses is a milestone event. Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry. We are confident that SSTL’s entry into the equity capital of RCOM as a strategic investor will strengthen the competitive position of the combined company and provide subscribers with superior experience by fast-tracking the growth of LTE technology in India,” said Mr Mikhail Shamolin, President and CEO of Sistema.