Reliance Communications in talks to buy Sistema Shyam TeleServices

Anil Ambani controlled Reliance Communications (RCom) is engaged in exclusive talks to buy Russian conglomerate Sistema's mobile phone arm in India to consolidate its position as the nation's fourth largest private sector telco.

RCom will offer shares in the company to Sistema Shyam TeleServices in return for acquiring spectrum and customers in nine telecom circles, or service zones.

"Reliance Communications and AFK Sistema have entered into exclusive discussions on a potential merger between the Indian telecom business of Sistema Shyam TeleServices Limited and RCom through a stock swap," RCom said in a statement on Monday.

An SSTL spokesperson said that SSTL concurs with the statement released by RCom.

According to industry sources involved in the deal, SSTL is pushing to have about 10 per cent stake in the resultant entity while RCom wants to settle it at around seven-toeight per cent.

"The discussions are indicative and non-binding in nature and remain subject to due diligence, definitive documentation and approvals as may be necessary. There is no certainty that any transaction will result," RCom further said.

Sistema's billionaire owner Vladimir Yevtushenkov had in May said that he had held talks with RCom about a possible joint venture in India.

The deal would give Reliance Communications access to Sistema's airwaves in nine circles without a significant payout as most of its airwaves were bought in competitive auctions.

SSTL operates in nine telecom circles-Delhi, Kolkata, Rajasthan, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh (West), Kerala and West Bengal.

Sistema's licence in Rajasthan service area will come up for renewal in 2017-18. The company did not participate in the March spectrum auction. This made SSTL heavily dependent on its competitors to chalk out a growth path that too if government issues favourable spectrum sharing and trading guidelines.

RCom won CDMA spectrum across 11 service areas which include Gujarat, Kolkata, West Bengal and UP West as common service area of operations with SSTL in the March spectrum auction.

After the merger, the resultant entity will have liberalised CDMA, or 800 MHz band, spectrum across 15 telecom circles.

The 800 MHz band is considered to be most efficient spectrum range for 4G services. RCom holds highest amount of 800 MHz spectrum most of which is due for renewal in 2022-23.