Telecom department approves RCom-MTS merger

The telecom department has approved the merger of Reliance Communications and Sistema Shyam Telecom Limited (SSTL), which operates the MTS brand in nine circles in India, two sources aware of the development said.

The department, which was the final authority to give a nod to the merger, gave a go-ahead on October 20, following which operations of the Russian backed carrier which has 4 million users, will be transferred to the Anil Ambani owned carrier.

“The DoT issued the letter on October 20,” said one of the sources aware of the development that took place last week.


RCom and SSTL didn’t immediately comment. RCom’s stock on the Bombay Stock Exchange has risen 7.29% to Rs 17.65 as of 1 pm on Monday.

The deal, which is valued at Rs 5,000 crore, would provide RCom with 3.75 MHz of highly valuable spectrum in 850 MHZ band in Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, UP (West), Kolkata, West Bengal and Rajasthan. SSTL has spectrum holdings in these circles, except for Rajasthan, valid till FY 2033, and therefore would reduce the need for RCom to buy airwaves in future auctions. RCom's CDMA spectrum in eight circles is set to expire in 2021.

As of July data from the Telecom Regulatory Authority of India (Trai), MTS had nearly 4 million customers. Considering that all of these customers are users of data, they would add value to RCom’s base of 81 million users. RCom would also benefit from MTS' revenue generation of Rs 1,000 crore. All of MTS' customers will be moved to 4G when they move to RCom, a second source said.

Post merger, RCom would pay Rs 400 crore a year, starting February 2016, for next ten years, for spectrum that MTS purchased in 2013.