RCom gains after announcing merger

Reliance Communications rose 1.73% to Rs 76.55 at 12:49 IST on BSE after the company signed a pact for merging Sistema's Indian wireless business into the company.

The announcement was made during trading hours today, 2 November 2015.

Meanwhile, the BSE Sensex was down 235.58 points, or 0.88%, to 26,421.25.

On BSE, so far 14.89 lakh shares were traded in the counter, compared with an average volume of 18.22 lakh shares in the past one quarter.

The stock hit a high of Rs 78.20 and a low of Rs 75.50 so far during the day. The stock hit a 52-week high of Rs 117.40 on 18 November 2014. The stock hit a record low of Rs 45.65 on 25 August 2015.

The stock had outperformed the market over the past one month till 30 October 2015, rising 10.82% compared with 1.92% rise in the Sensex. The scrip had also outperformed the market in past one quarter, rising 10.10% as against Sensex's 3.78% decline.

The large-cap company has an equity capital of Rs 1244.49 crore. Face value per share is Rs 5.

Reliance Communications (RCom), one of India's leading fully-integrated telecommunications service providers, and Sistema JSFC, a publicly-traded diversified holding company in Russia and the CIS, announced the signing of definitive documents for demerger of Sistema's Indian wireless business, carried on by Sistema Shyam Teleservices (SSTL) under the MTS brand, into RCom.

RCom will acquire approximately 9 million customers and approximately Rs 1500 crore of annual revenues by virtue of the transaction. In addition, RCom will acquire SSTL's most valuable and superior 800 / 850 MHz band spectrum, ideally suited for 4G LTE services, to complement its own unique nationwide footprint of minimum 5 MHz contiguous 800 / 850 MHz spectrum aggregating 148.75 MHz, RCom said in a statement.

This will extend the validity of RCom's spectrum in 800 / 850 MHz band in 8 important circles by a period of 12 years from 2021 till 2033 (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal), the statement said.

As result of the demerger, SSTL will acquire and hold a 10% equity stake in RCom. In addition, RCom will assume the liability to pay the Department of Telecommunications (DoT) instalments for SSTL's spectrum, amounting to Rs 392 crore per annum for the next 10 years, it said.

Prior to closing of the transaction, SSTL intends to pay off its existing debt. An appropriate payment/earn-out mechanism has been agreed in relation to disputed spectrum contiguity charges claimed by DoT.

The closing of the transaction, expected in the second quarter of 2016, is subject to customary conditions precedent, including inter alia applicable corporate, regulatory and other approvals. Post closing of the deal, minority investors of SSTL will be given an option to exchange their shares in SSTL with the pro-rata RCom shares held by SSTL, the statement added.

On a consolidated basis, RCom net profit rose 34.1% to Rs 177 crore on 2.6% increase in net sales to Rs 5429 crore in Q1 June 2015 over Q1 June 2014. The company announce Q2 results on Friday, 6 November 2015.

RCom is an integrated telecommunications service provider.

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