Anil Ambani-led Reliance Communications shares drop to record low after Aircel merger deal collapses

Anil Ambani's Reliance Communications shares drop to record low after Aircel merger deal collapses

Reliance Communications’ share today tumbled to an all-time low after the company scrapped a proposed merger of its wireless arm with rival Aircel.

RCom stock today opened at Rs 18.70 and touched a fresh all-time low of Rs 16.75. During the intra-day trade today, the stock fell over 10 per cent and closed at Rs 17.15. Earlier on Sunday, Reliance Communications had called off the talks with Aircel citing regulatory delays and legal uncertainties.

RCom on Monday issued a statement and said: “Merger of mobile business of RCom and Aircel lapses with mutual consent. Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction.”

Last year in September, RCom and Aircel had signed binding agreements for the merger of mobile business. Reliance Communications also blamed high level of competition as one of the reasons for termination of the merger talks.

“Unprecedented competitive intensity in the Indian telecom sector together with fresh policy directives, adversely impacting bank financing for this sector, have also seriously affected industry dynamics. As a result of the various factors aforesaid, the merger agreement has lapsed,” RCom said.

On Monday, Anil Ambani-led RCom further expanded its board by adding four new members. The company has also presented an alternative plan for debt reduction by selling company’s real estate, tower and fibre business.

Anil Ambani’s telecom business has been shrinking in big size for last couple of years – RCom made a standalone loss of Rs 1796 crore in the last financial year, compared to its peak profit of Rs 4803 crore in March 2009 and its net sales fell by 35 per cent to Rs 8823 crore in this period.

In early July, RCom blamed Mukesh Ambani’s reliance Jio as the reason for financial stress in the telecom industry. “the telecom industry’s current financial problem to some extent can be attributed to the entry of a new telecom operator (Jio) and its strategy of offering freebies to gain customer and market share,” the company said in a notification to the BSE.

At the Reliance Capital annual general meeting (AGM), Anil Ambani termed falling wireless telephony rates as “creative destruction” and not a “disruptive factor” and said that unlimited free voice offers and “irrational pricing” by all industry participants have destroyed profitability of traditional 2G and 3G mobile business.

Earlier in May, it was reported that RCom defaulted on its loan servicing obligations with more than 10 local banks and some of whom categorised the exposure as “special mention account” in their asset books.

Anil Ambani-led RCom has been pursuing a three way merger involving Sistema Shyam Teleservices and Aircel for more than a year. Also, it has been trying to sell the tower unit Reliance Infratel to Canada’s Brookfield to partly repay the debt of over Rs 45,000 crore.