In a major shock to the business world RCom (Reliance Communications) has called off its merger with Aircel. The Anil Ambani owned company Reliance Communications released a press statement which stated that calling off the merger with Aircel was a mutual decision of both the companies. Blaming the legal uncertainties of the market right now the press release explained Inordinate delays caused by legal and regulatory uncertainties, various interventions by vested interests, policy directives impacting bank financing for telecom and changed industry dynamics to be the problem. The debt of the Reliance Communications was to be supposedly come down by as much as 60% if the Reliance-Aircel merger had been successful.
Assuring the shareholders of the bright future of Reliance Communications, Anil Ambani said that the company had ‘backup options’ and they will have clarity of the future of Reliance Communications by March 2018.
The focus of the Reliance Communications is back to repaying its debts. According to sources the company is looking to monetise its real estate assets in Navi Mumbai and Delhi which will reportedly bring 10000 crores. It may also sell its company tower as announced earlier which will bring an additional 10000 crores.
Reliance- Aircel merger was objected in the past as well
This is not the first time the Reliance-Aircel merger has seen roadblocks. Initially several key investors in the Reliance Communications namely the China Development Bank, Standard Chartered Bank and HSBC objected the move but later gave in. Later other investors like Indus Towers, Ericsson and Bharti Infratel demanded their dues be payed off by the Reliance Communcations before the Reliance-Aircel merger initiated.
Competition by JIO to Reliance-Aircel :
Anil Ambani admitted that the Reliance Communications telecom was facing regulatory, legal, and corporate rivalries. He said the company will strive to close a merger and a stake sale so that to reduce its huge debt. He also added that due to the tough and a relatively uncertain face the telecom industry is facing, no local or foreign banks are willing to invest in Reliance Communications.
The launch of JIO 4G services last year took the world by storm as it offered free voice calls and unlimited data for as low as 150INR. To make things worse for its competitors like Reliance Communications it also offered free services for a period of six months after the launch.
Source: The Economic Times.