Russia's telecom major AFK Sistema has entered into exclusive talks for a potential merger between its Indian telecom business Sistema Shyam Teleservices (SSTL) and Reliance Communication through a stock swap, RCom said in a statement filed after the Bombay stock market closed on Monday. This could lead to a potential consolidation in the extremely competitive telecom sector.
"The discussions are indicative and non-binding in nature, and remain subject to due diligence, definitive documentation and approvals, as may be necessary," the Anil Ambani-led RCom said in the statement. "There is no certainty that any transaction will result," the statement added.
SSTL is a joint venture between Sistema Joint Stock Financial Corporation (JSFC) of Russia, the Russian Federation, and the Shyam group of India, in which Sistema JSFC is a majority stakeholder.
According to a report in the Times of India, with this deal, RCom, the fourth biggest Indian telecom company, will merge the MTS India operations of SSTL into itself and, in turn, SSTL will pick up stake in RCom, which is looking to pare down its huge debt component.
RCom has high debt while Sistema has a large amount of unutilised spectrum and relatively few clients.
"It is extremely important news from the point of view of RCom shareholders. RCom's spectrum licence will expire sometime in 2017, whereas the Sistema's licence in India, which they have paid for partially and acquired one-one and a half years back, is there for 20 years," said Sudip Bandyopadhyay, President, Destimoney Securities in an interview to ET Now.
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