# Reliance Telecommunications Ltd (Rs.47.80), could benefit, as
|Photo: Business Today|
Now according to a report published in Business Today, July 3, Edition, in the telecom sector, the scenario is changing rapidly. Technology - 3G, 4G, WiMAX - is changing fast, and smaller operators are not in a position to invest adequately to upgrade their networks. On the other hand, the strong network holdings and large investments by big telcos have made it difficult for smaller players to survive on their own. As a result, large operators like Bharti Airtel, Vodafone and Idea Cellular are growing their subscriber base at a significant pace, even as most of the smaller ones see their share of the pie shrinking. The impending launch of Reliance Jio's 4G services, expected to be a big draw for consumers, has further queered the pitch for small telecom companies. This will reduce competitions for big players like Reliance Communications Ltd, too.
Reliance Communications (RCom), is planning a merger with two smaller telcos - Sistema Shyam TeleServices (SSTL) that operates MTS brand, and Aircel. RCom's and MTS's market shares have been dipping for two years whereas Aircel's is showing marginal uptrend in subscriber numbers. If the merger works out, the new entity will have a subscriber base almost on par with the No. 2, Vodafone.
Analysts believe the merger will give a new lease of life to the three operators. "They would have been completely marginalised in the next two to three years," says an analyst. There are other challenges, including the fact that all three entities have significant debt on their books. As on December 31, 2015, RCom had Rs 40,479 crore of debt while Aircel, about Rs,18,000 crore. An analyst points out that Aircel's Rs.3,500-crore deal (for 2,300-MHz spectrum) with Bharti Airtel will help reduce Aircel's debt. The new entity is expected to have debt of around Rs.28,000 crore - with both RCom and Aircel contributing equally - provided RCom successfully reduces its debt by selling tower and optic fibre businesses.
Experts say that RCom's inability to make sufficient investments in its networks can partly be resolved with its impending tie-up with Reliance Jio, which has already spent Rs 1.5 lakh crore in buying spectrum and building an ecosystem of services around 4G. It is expected to use RCom's spectrum as a fallback network.