Aircel Merger: Reliance Communications shares in red after a positive opening

Shares of Anil Ambani-led Reliance Communications (RCom) dropped by Rs 0.35 per share on BSE, down 0.69% after opening in green on Thursday after the company announced merger with Aircel to create India's fourth largest telecom company on Wednesday night. 

At opening-trade on Thursday, shares of RCom were trading at Rs 52.90 per share, up Rs 1.55 or 3.04% on BSE Sensex. 

The company, on Wednesday, said that it will merge with Aircel to create India's third largest telcom operator by revenue in 12 circles. It further said that the new entity will be India's fourth largest telecom operator. 

RCom said that its debt will be reduced by Rs 20,000 crore after the deal and Maxis will see a debt reduction of Rs 4000 crore. 

The merged company will have an asset base of over Rs. 65,000 crore ($9.7 billion) and net worth of Rs. 35,000 crore ($5.2 billion), RCom said. 

Reliance Communications, controlled by billionaire Anil Ambani, will own half of the merged the entity, while Aircel`s parent, Malaysia`s Maxis Communications Bhd, will own the other half, the two sides said in a joint statement.

As of end-March, Reliance Communications had a net debt of 413.62 billion rupees, according to latest company data. Closely-held Aircel had 185 billion rupees of debt as of 2013, according to rating agency ICRA.

"We expect this combination to create substantial long term value for shareholders of both, RCOM and MCB, given the benefits of the wide-ranging spectrum portfolio and significant revenue and cost synergies," Reliance Communication`s chairman Ambani said in a statement.

The companies had entered into exclusive talks in December last year. 

India`s telecoms market is the world`s second-biggest behind China, with more than 1 billion mobile phone subscriptions, but tough competition means low margins for the 10 carriers.

Reliance Jio, a new telecoms venture backed by India`s richest man Mukesh Ambani, Anil`s elder brother, is expected to shake up the market and trigger a price war with its cut-rate offerings. 

In the first sign of sector consolidation, Reliance Communications in November agreed to buy Russian conglomerate Sistema`s Indian mobile phone business in an all-stock deal.

(With Reuters)