Reliance Communications, which is reeling under a debt of about Rs 46,000 crore, Sunday called off merger talks with Aircel, citing "legal and regulatory" delays and outlined an alternative plan for debt reduction by selling real estate as well as tower and fibre business.
"Merger of mobile business of RCom and Aircel lapses with mutual consent," the Anil Ambani-led firm said in a statement. RCom and Aircel had signed binding agreements in September 2016 for the merger of mobile business.
"Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction," it said.
RCom also blamed high level of competition as one of the reasons for termination of the merger talks.
"Unprecedented competitive intensity in the Indian telecom sector together with fresh policy directives, adversely impacting bank financing for this sector, have also seriously affected industry dynamics. As a result of the various factors aforesaid, the merger agreement has lapsed," RCom said.
The company said that unlimited free voice offers and "irrational pricing" by all industry participants have destroyed profitability of traditional 2G and 3G mobile business.
It was claimed that with the deal the debt of RCom will come down to around Rs. 20,000 crores, while that of Aircel to around Rs. 4,000 crores.
RCom now plans to monetise prime real estate in Mumbai and Delhi as well as telecom tower and optic fibre assets by December to avoid lenders converting a part of their debt into equity.
The company, however, also said that the combination of the mobile business of Sistema Shyam Teleservices Ltd (SSTL) into RCom will be completed this month.
This merger would bring to the company SSTL's valuable spectrum holdings in the 800-850MHz band, strengthening RCom's spectrum portfolio by 30MHz as well as extend its spectrum validity period in 8 important circles by another 16 years to 2033.
RCom said that its Board of Directors at a meeting held on Sunday in Mumbai reviewed the ongoing strategic transformation programme and considered alternative plans for debt reduction.
The board decided that RCom will evaluate an alternative plan for its mobile business, through optimisation of its spectrum portfolio and adoption of a 4G focused mobile strategy.
"RCom already has the unique advantage of capital light access to India's most extensive world class nationwide 4G mobile network through spectrum sharing and ICR (intra-circle roaming) Agreements with Reliance Jio," it said.
It has spectrum across 800, 900,1800 and 2100MHz spectrum bands aggregating 200MHz, valued at over Rs. 19,000 crores for the balance of validity period, based on last auction pricing.
"The company will evaluate opportunities for monetisation of the same through trading and sharing arrangements," the statement said.
RCom had defaulted on some of its debt obligation and has been given additional time to service its debt by lenders.
"The company continues to be under a standstill period till December 2018 and expects to complete the SDR process as per applicable guidelines," it said.
Shareholders of the company at the annual general meeting held on September 26, 2017 have already approved issuance of equity shares to lenders by conversion of loans.
RCom said that it will focus on domestic and overseas B2B business.
"These B2B businesses generate equal revenues from domestic and overseas operations. As part of the ongoing transformation and in order to enhance value for all stakeholders, the RCom board reaffirmed the focus on these stable, capital light B2B businesses which have sustained and predictable revenues and profits, with immense growth potential," the company said.
It also claimed that the firm has made progress on steps to monetise real estate which includes nearly 125 acres of land at Dhirubhai Ambani Knowledge City (DAKC) in Navi Mumbai with development rights of potentially over 17 million square feet and another around central Delhi measuring nearly 4 acres.
"Indications of interest from leading developers, and independent third party valuations, have established significantly higher present value monetisation potential of Rs. 10,000 crores for the DAKC Complex alone," RCom said.
The company also expects to realise Rs. 11,000 crores from sale of its tower business.