Tata Teleservices rallies nearly 18% on three-way merger talks

NEW DELHI: Tata Teleservices Ltd rallied as much as 17.78 per cent in mid-morning trade on Friday, after TTML, Russia's Sistema JSFC and Aircel, controlled by Malaysia's Maxis, are in exploratory talks for a three-way merger to create India's third-largest telecom company by subscribers.

"If the transaction materialises, it will allow the companies to cut costs, share infrastructure and pool capital," ET reported. It will create a combined entity with 13.5 crore subscribers.

At 09:40 a.m.; Tata Teleservices pared some of the morning gains and was trading 10.9 per cent higher at Rs 6.92. It has hit a low of Rs 6.50 and a high of Rs 7.35 in trade today.

ET reported a person with direct knowledge of the development said a three-way merger would be complicated and will take some time to fructify. "There was a fair amount of discussion between Tata Teleservices and Sistema.

Both Tata Teleservices, which is 26 per cent owned by Japan's largest mobile company NTT DoCoMo, and Aircel have been struggling to pare their debt - around Rs 23,000 crore and Rs 22,000 crore, respectively. Standard Chartered Bank is advising Aircel on its debt-restructuring exercise.

Sistema, on the other hand, is cash rich and would be the dominant shareholder if the three companies agree to merge, said the ET report.

The company, which is partly owned by the Russian government and operates in India through a joint venture with Shyam Telecom, has identified consolidation as the route to growth in the Indian market.

Spokespersons for both Aircel and Tata Teleservices said they would not comment on market speculation.

Sistema Shyam's pan-India licence to offer CDMA services in 22 circles was cancelled by the Supreme Court last year. But the company won back airwaves for eight states earlier this year and now has more than 9 million customers.