Reliance Communication completes merger with SSTL

Debt-laden Reliance Communications has completed a merger of Sistema Shyam Teleservices Ltd's (SSTL) telecom business with itself.

RCom also said that the Board also approved the issuance of shares to the tune of 10 percent of the equity shareholding of Reliance Communications Limited, to SSTL, as part of the agreement between the two companies.

RCOM acquired the telecommunications business of SSTL including its licenses. In addition, the former will get 30 MHz of the most valuable and superior 800 / 850 MHz band spectrum, ideally suited for 4G LTE services and other evolving technologies, to complement its own unique nationwide footprint.

This will result in the extension of the validity of RCOM's spectrum portfolio in the 800 / 850 MHz band in eight important Circles (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP-West and West Bengal) by a period of 12 years-from 2021 to 2033.

As a result of the demerger, SSTL will receive a 10 percent equity stake in the fully diluted equity share capital of RCom. In addition, the Anil Ambani-led telco will assume the liability to pay the DoT, installments for SSTL's spectrum, amounting to Rs 390 crore per annum for the next 8 years.

The company has come up with the new strategy for its debt. The company has made comprehensive debt resolution plan to its domestic and foreign lenders.

Under this plan, the company will pay off up to Rs. 17,000 crore of its debt, out of the proceeds of monetization of Spectrum, Towers, and Fiber and MCN (Media Convergence Nodes) assets. RCom will pay additional Rs. 10,000 Crore of its debt, out of the proceeds of sales and commercial development of DAKC and other prime real estate assets across 8-metros.

The new RCom will have sustainable and profitable B2B - nonmobile business portfolio comprises.

The new RCom will have the sustainable and conservative level of debt of only Rs 6,000 crore. Cost of debt will be lower due to an ability to raise debt funds overseas at low cost. "RCom is under a standstill period (for interest and principal repayments) until December 2018 and expects to complete the SDR process as per applicable RBI guidelines," it said.