In the history of Indian telecom sector, a large consolidation is to take place for the first time. Recently the intensity of competition between incumbent operators has been on the rise, especially after Reliance Jio launched its extremely well shaped voice (Reliance prepaid mobile recharge) and data service plans. A subsidiary of Reliance Anil Dhirubhai Ambani Group, Reliance Communications, after acquiring Sistema Shyam TeleServices Limited (SSTL) aka MTS India, has now announced its merger with Aircel, a Maxis Communications company.
RCom (Reliance GSM – Reliance CDMA mobile top ups) enters into Joint Venture with Aircel
In one if the official announcements, it was declared that both Reliance Communications and Aircel will be merging their mobile network and wireless operations to form a third entity which will also emerge as the country’s fourth largest mobile network operator by subscribers and by revenue. It is also estimated to have the second-largest spectrum portfolio, and assets worth INR 65,000 crore. Both the companies are projected to have 50% stake in the merged company.
Projected Expansion with the Formation of the New entity
According to one of the official statements made by RCom it was said that “The combined entity will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with a net present value of around Rs 20,000 crore”. Another report by IDFC Securities estimated the revenue market share (RMS) of the new company to be around 11.3 percent and subscriber market share of 15.4 percent.
Advantages and Challenges before the Merged Company
Many analysts see the advantages to the new company as a matter of concern due to the probable challenges it will raise for existing competitors. However factors like subscription, skewed operations, limited share in certain circles, merger complexities, new brand and debt burden will definitely contribute to a greater extent in development of the new firm.
Rural Wireless Subscriber Base – An area for shared operations
Analysts from Counterpoint Research ascertain that Aircel has a relatively better market share in rural wireless subscriber base when compared to Reliance Communications. As a result of the merger the new entity will hold a strong presence in the rural areas of the country and a large number of new subscribers (mainly from the regions of Northeast, Gujarat, Haryana and others) will be attracted over a period of time.
A similar scenario is in the case of Reliance Jio and BSNL. BSNL who has a strong foothold in the rural networks, has entered into an intra-circle roaming tie-up with Reliance Jio wherein Jio users will be able to make use of BSNL’s 2G spectrum which will avoid call drops. This deal is expected to be mutually beneficial on account of Reliance Jio getting access to rural users through BSNL’s networks that are wide spread in the rural areas.
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