One of the immediate impact of the merger between Aircel and Reliance Communications’ wirless business is that the latter will be able to go ahead with the sale of its tower deal.
RCom has been trying to sell the tower assets for many years to bring down its overall debt.
It had earlier started discussions with private equity firm Tillman Global Holdings LLC to sell its tower assets.
However, this could not go through due to differences over valuations.
The Anil Ambani-backed telecom firm has now extended the discussions to at least two or three other interested bidders, including Brookfield Asset Management.
In December, RCom had inked an agreement to sell its tower assets to private equity firms TPG and Tillman Global. The companies had entered into an exclusivity agreement till January 15. The exclusivity was then further extended.
However, differences over valuation forced RCom to look beyond Tillman.
The merger with Aircel will perhaps help RCom improve the valuations as it gets one more additional tenant. RCom wants to sell its 44,000 telecom towers to pare debt, which stands at ₹40,479 crore.
The company hopes to get about ₹20,000-22,000 crore from the sale of tower assets.
Of the balance ₹20,000-crore debt, RCom plans to transfer ₹14,000 crore to the newly created company post the merger with Aircel.
Merged entity may prune workforce
The newly-created entity post the merger between Aircel and Reliance Communications’ wireless business is likely to prune its employee base from 15,000 to about 10,000-11,000 workers
“There is bound to be overlapping roles so whenever a merger of this nature happens there is some pruning that requires to be done. For example, RCom may have 22 circle heads and so will Aircel. The merged entity will need only one circle head,” said a person close to the development.
India’s largest operator Airtel has 19,861 employees to manage 255 million subscribers giving it 13,590 customers per employee. The RCom plus Aircel entity will have 180 million subscribers and 15,000 employees.
While RCom did not comment on the potential job losses, sources inside the company said that many people have already been sounded out.
Reliance Group had effected a similar cut in jobs after it had acquired Pipavav Defence and Offshore Engineering. About 200 working at Pipavav is understood to have been asked to go. But in the case of the telecom business, since both Reliance and Aircel management have equal stake there could be job cuts on both sides.
“It could depend on who becomes the CEO of the merged entity. Currently, RCom’s mobile business is under Gurdeep Singh and Aircel is headed by Kaizad Heerjee. Usually, the CEO takes his team along with him and tries to adjust headcount from the other side in a merger situation,” said an industry watcher, who has tracked global mergers including between Nokia and Siemens; and Alcatel and Lucent.