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Telenor in talks with RCOM for a potential merger deal: report

Norway-based telco Telenor is looking to merge its India operations with Reliance Communications, reports ET, citing un-named sources. Telenor was in talks with RCOM for a possible merger of its customer base, spectrum holdings, and the entire business unit with Aircel-Rcom merged entity. According to the report, Telenor’s proposal included a 10% stake in the merged entity, with Aircel and RCOM owning 45% each in the joint venture.

A spokesperson from Telenor told MediaNama: “As a general principle Telenor does not comment on market rumors and speculations.” RCOM did not respond to our query yet. Note that Telenor was reportedly in talks with Airtel for a $350 million merger earlier this month. Airtel was looking to acquire half of Telenor India’s liabilities, while Telenor was looking to hold the remaining half. Both companies did not comment on the reports when MediaNama wrote to them.

However, the speculated Telenor-RCOM merger is of a different nature. The Aircel-RCom merger which is worth Rs 65,000 crore (~$9.7 billion) could be in jeopardy due to Aircel promoter Maxis Berhad’s role in the infamous 2G scam.  This month, the Supreme Court ordered Maxis, which owns 74% stake in the company to attend a lower court for proceedings; it added that Aircel’s 2G spectrum in 14 circles could be withdrawn if the promoters don’t show up.

It’s unlikely that Reliance might call off the Aircel-RCOM merger since Aircel’s 2G spectrum is at stake with the SC judgment, its 3G spectrum allocated to it via auctions will remain untouched. Telenor, on the other hand, has 4G spectrum (1800 MHz band) in 7 circles, and this could make up for Aircel’s spectrum loss.

Competition and consolidation in the telecom sector

After the launch if Reliance Jio which is currently offering free calls and data:

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-Both Vodafone Group and Idea confirmed that they were in talks for a potential merger deal, although the financials of the deal were not disclosed. If the merger goes through, Vodafone would be in a better stance to compete with Airtel, which is currently the biggest operator in terms of subscribers.

-Smaller operator Videocon announced that it will shut down operations in Punjab by February. The company earlier announced it would not be exiting the telecom business fully and would apply for VNO license instead.

-Idea’s net profit took a beating, Vodafone lost some of its data customers, and, Airtel’s subscriber base, data consumption and ARPU declined by a significant margin.

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