New Delhi: Billionaire Anil Ambani-led Reliance Communications is in talks to merge its wireless business with smaller rival Aircel to create the country's second-biggest mobile phone operator by user numbers.


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RCom said it is holding non-binding, but exclusive talks, with Aircel's majority owner Malaysia's Maxis Communications and another shareholder Sindya Securities and Investments.


It entered into a 90-day 'exclusivity period' for the deal that will exclude RCom's tower and optical fibre assets for which a separate sale process is ongoing, the company said in a statement.


Also Read: RCom stock up 2% on wireless biz merger talks with Aircel


RCom is India's fourth-biggest telecom operator with almost 110 million customers, while Aircel ranks fifth with 84 million subscribers.


Merger with Aircel together with buying Russian firm AFK Sistema's Indian wireless unit as announced last month, could nearly double RCom's number of subscribers to more than 200 million. Sistema had 8.36 million users.


For its towers and fiber-optic infrastructure assets, RCom had earlier this month said that it is in talks to sell them to private equity firms Tillman Global Holdings LLC and TPG Asia Inc by mid-January.


In the statement RCom said: "It has entered into a 90-day exclusivity period with Maxis Communications Berhad (MCB) and Sindya Securities and Investments Pvt Ltd, the shareholders of Aircel Limited, to consider the potential combination of the Indian wireless businesses of RCom and Aircel."


According to sources, the proposal on the table includes operation of mobile business of three companies -- RCom, MTS and Aircel, under a new entity led by RCom.


The merged entity will be created through equity deal where RCom's shareholders are looking for three shares against each held by them.


The debt of RCom, which is estimated go down below Rs 10,000 crore after its mobile tower sale deal is closed, will be transferred to this new entity and the company will become free of debt, sources said.


"RCom has expressed interest in focusing on enterprise business while the new entity, whose brand and other details will be finalised later, will run mobile business created by using resources of RCom, Aircel and MTS," they said.


The combination of RCom, Aircel, MTS wireless businesses will hold 19.3 percent of the total spectrum allocated to the industry - the highest in the country by an entity.


The new entity, which is in the works, will hold spectrum across all allocated bands -- 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz and 2300 MHz -- for 2G, 3G and 4G services.


"With merger of MTS and Aircel, Reliance Communications will become a formidable entity with approximately 200 million subscribers. Furthermore, with spectrum consolidation, it can plan its longer term business strategy better," Gartner Research Director Amresh Nandan said.


"It will allow them (RCom) to target high-end services on mobile broadband and business-centric mobility solutions."


RCom said the idea of potential combination of business with Aircel is to mutually derive expected substantial benefits of in-country consolidation, including operating expenditure (opex) and capital expenditure (capex) synergies and revenue enhancement.


"The discussions are non-binding in nature. Any transaction will be subject to due diligence, definitive documentation and regulatory, shareholders' and other third-party approvals. Hence, there is no certainty that any transaction will result," the company said.


The potential combination will exclude RCom's towers and optical fibre infrastructure, for which RCom is proceeding with an asset sale, as announced on December 4, 2015.


On December 4, RCom said it had signed a non-binding pact to sell its cellular towers to private equity firm Tillman Global Holdings LLC and TPG Asia Inc in an estimated Rs 30,000-crore deal to pare debt.


The stock of Reliance Communications today closed at 85.70, up 2.39 percent on BSE.


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