Sistema JSFC (“Sistema” or “the Company”), a publicly-traded diversified holding company in Russia and the CIS, announces an agreement to merge Sistema’s Indian telecommunications business with business of Reliance Communications Ltd.
The signed documentation provides for the demerger of the telecommunication business from Sistema Shyam TeleServices Ltd (“SSTL”) and its merger with the telecommunications business of Reliance Communications Ltd (“RCom”) based on a Merger Scheme to be approved by Indian courts. The merger will enable, SSTL will acquire and hold a 10% equity stake in RCom. In addition, prior to the transaction’s completion, SSTL plans to pay off existing debt.
Following the completion of the transaction, RCom will take responsibility for payment of SSTL’s frequency spectrum licensing fees payable by installments to the Department of Telecommunications of India. An appropriate earn-out mechanism has also been agreed in relation to disputed spectrum contiguity charges claimed by the Department of Telecommunication of India.
“The merger of SSTL and RCom’s telecom businesses is a milestone event. Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry. We are confident that SSTL’s entry into the equity capital of RCom as a strategic investor will strengthen the competitive position of the combined company and provide subscribers with superior experience by fast-tracking the growth of LTE technology in India. Moreover, we believe the completion of this transaction will serve as an example of growing business ties between Russia and India and encourage other investments between the two countries”, said Mikhail Shamolin, President and CEO of Sistema.
“We are delighted to welcome Sistema Shyam TeleServices Ltd. as a valued shareholder and partner in Reliance Communications Ltd. The combination of our wireless businesses, through the demerger of SSTL wireless business into RCOM for stock consideration, will generate significant capex and opex synergies for mutual benefit. The Indian data market is witnessing explosive growth, and SSTL’s proven strengths in that space will further enhance RCOM’s capabilities in delivering a superior experience to our valued customers. We are pleased that the addition of SSTL’s valuable spectrum holdings in the 800 – 850 MHz band will strengthen RCOM’s spectrum portfolio, and extend our ability to provide world class 4G LTE services to our customers in 8 important circles in the country till the year 2033”, said Gurdeep Singh, President & CEO, RCOM Consumer Business.
“We believe this transaction underscores SSTL’s track record in building the fastest-growing data services provider. This is an exciting new chapter for India’s telecom industry and we look forward to leveraging our companies’ combined experience for the development of LTE in India”, said Sergey Savchenko, CEO of Sistema Shyam TeleServices Ltd.
The merger is expected to be completed by Q2 of 2016.