Consolidation in India As Reliance in Talks to Buy Aircel Cellular
Published on: 20th Aug 2007
Note -- this news article is more than a year old.
Reliance have been trying to expand its GSM network but lacks the licenses to cover the whole country while Aircel does hold the necessary licenses. However Aircel is itself generally considered to be too small to be able to effectively roll out a network across its entire licensed regions (known as circles) and has been subject of speculation that a rival company would buy it primarily to get hold of the licenses it holds.
A consultant with extensive experience in arranging mergers and acquisitions in India told Mint that Anil Ambani, who chairs Reliance Communications' board of directors was aiming at management control at Aircel. "The buzz has been that Anil Ambani is looking at a controlling stake," said a partner at a New Delhi-headquartered consulting firm, preferring that he not be identified. "But whether that will be through a direct stake or a deferred stake, such as a call option, will depend on the changes to the crossholding regulations being put in place by the telecom regulator."
At the moment, any attempt by Reliance to take a controlling stake in Aircel would be blocked by local regulations which prevent one operator owning more than 10% of a rival operator within the same licensed circle. However this restriction is widely expected to be relaxed in a ruling from India's telecoms regulator later this week.
Analysts saw synergies in a Reliance-Aircel union. "There are many reasons why RCom and Aircel are a good fit," an unnamed Mumbai-based telecom stock analyst told the newpaper. "RCom needs the GSM licence and the spectrum that comes with it, and for Maxis, it is a matter finding the right partner to roll out and compete in an extremely competitive market."