MergedCo off air: NCLT approves withdrawal of Merger Deal

Lex Resonance

[October 14, 2017]


The National Company Law Tribunal, Mumbai Bench (NCLT) has passed orders dated October 13, 2017, approving the withdrawal of the Scheme of Arrangement between the two companies. RCom, which is spinning under a debt of about Rs 46,000 crore, had called off merger talks with Aircel, citing “legal and regulatory” delays and “various interventions by vested interests”. The Mukesh Ambani­ owned operator leases much of RCom’s network and shares spectrum with it and has hurting mostly tail ending operators, including RCom with free data services and nominal charges later. RCom has lost the most number of subscribers in the past six months and its net loss widened to Rs 1,221 crore in April June 2017, from the Rs 966 crore in the previous quarter. Aircel has also been bleeding and a merger was considered to strengthen both companies by reducing duplication. The two were expected to fold Rs 14,000 crore debt each into the merged entity, besides the outstanding deferred payments of Rs 7,000 crore for spectrum. RCom also had plans to sell its telecom towers to Brookfield for Rs 11,000 crore. The company would keep a minority economic interest in the towers, while the private equity firm will have full voting and management rights.


Chapter XV deals with Compromises, Amalgamations and Arrangements under the Companies Act, 2013. The term merger is not defined under the Companies Act, 1956 and the Income Tax Act, 1961 but the new Companies Act, 2013 explains the concept. The merger part is contained in Section 230 to 234 in the scheme of arrangement under the new Companies Act, 2013. SEBI (Substantial Acquisition of Shares and Take-Overs) Regulations, 2011 known, as the Take Over Code is responsible for restricting and regulating the acquisition of shares, voting rights in listed companies. While the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 govern the manner in which CCI will regulate combinations.


September 14,2016: Reliance Communications Ltd. (“RCOM”), India’s leading fully-integrated nationwide telecommunications service provider, and Maxis Communications Berhad (“MCB”), promoters of Aircel Limited (“Aircel”), a leading pan-India mobile operator announced the signing of definitive documents for the merger of their Indian wireless businesses – the largest-ever consolidation in the Indian telecom sector.


MergedCo will have the second-largest spectrum holding amongst all operators, aggregating 448 MHz across the 850, 900, 1800 and 2100 MHz bands, and will enjoy enhanced business continuity through the extended validity of spectrum holdings till 2033-35. The combination of business with Aircel Ltd. was in a 50:50 Joint Venture with MCB. MCB further reinforced its commitment to India since acquiring Aircel in 2006, MCB has invested in excess of INR 35,000 crore (USD 5.2 billion) into Aircel, making this one of the largest foreign investments into India, not only in the telecom industry but across all sectors.


Reliance Group, founded by the late Shri Dhirubhai H Ambani (1932-2002), currently has a net worth in excess of Rs 100,840 crore (USD 15.2 billion), cash flows of over Rs 11,300 crore (USD 1.7 billion) and the profit of over Rs 5,100 crore (USD 0.8 billion). Reliance Communications is India’s foremost and truly integrated telecommunications service provider. The Company has a customer base of over 107 million, including over 2.6 million individual overseas retail customers. Reliance Communications’ corporate clientele includes over 39,000 Indian and multinational corporations including small and medium enterprises and over 290 global, regional and domestic carriers. Reliance Communications has established a pan-India, Next-Generation, integrated (wireless and wireline), convergent (voice, data and video) digital network capable of supporting best-in-class services, spanning the entire communications value chain, covering over 21,000 cities and towns and over 400,000 villages. Reliance Communications owns and operates the world’s largest Next-Generation IP-enabled connectivity infrastructure, comprising over 280,000 kilometres of fiber optic cable systems in India, the United States, Europe, the Middle East and the Asia-Pacific region.


Aircel is one of India’s leading innovative mobile service providers. The company is a pan-India 2G operator with 3G spectrum in 13 circles and is credited with the fastest 3G roll out ever in the Indian telecom space. As a young data led telecom player, Aircel has constantly been at the helm of introducing innovative and value for money products and services for its customers, be it the Aircel Pocket Internet, taking the first step in making 3G affordable for the masses or launching revolutionary Industry first data products aimed at fuelling Internet adoption. The company has been the proud recipient of coveted awards such as Voice & Data Special Leadership Recognition in ‘Customer Service’ category, ET.

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