Reliance Communication (RComm) and Maxis Communications (MCB) have signed definitive documents for the merger of India wireless businesses of RCOM and Aircel. The merged entity would have revenue and VLR subscriber market share of 11.3% and 15.4%, respectively. The deal is expected to close in 2017 after court and lenders approvals for demerger process and RCOM-MTS deal consummation.
RCOM would demerge its wireless operation into a separate SPV (5.7% revenue share) and merge it with mobile operations of Aircel (5.6%).
The merged wireless entity is unlikely to be listed separately in the near term, and RCOM shareholders would hold stake in it through RCOM stock.
The deal generates scale (11%+ revenue share; 448MHz spectrum; Top3 position in 12 circles; $ 0.7-0.9 billion EBITDA) for both RCOM and Aircel to compete effectively with larger players. This deal would incrementally reduce competition at the lower end of the market. We expect 5-6 pan India players competing for wallet share over the medium term.
Maintain ‘neutral’ on RComm, with corporate actions as key drivers of the stock.