Tuesday, May 30, 2017

RCom in Trouble - Aircel Merger

Reliance Communication Company owned by Anil Ambani is facing a crisis. Already indebted to the tune of 45000 plus crore rupees there seems no hope for a turnaround. 

The company's core business revenue is dropping drastically on all fronts - voice and data. The steady decline is attributed to  customers switching to other service providers and stiff competition for RIL Jio. The company has reported losses subsequently from last few quarters due to reduction in usage affecting revenue per customer. The company has failed to retain or increment its mobile broadband customers.    

The shares of ADAG companies have shown a constant downfall. RCom has to service its debt in order to retain its position in the market somewhat. RCom Aircel merger which has been approved by concerned bodies will assist in business recovery hopefully. This will come in form of demerger with Aircel & Dishnet Wireless Limited. This transaction will substantially reduce RCom's depth as well as Aircel's depth.         

The merger will result in making it one of India's largest private sector companies. After the merger RCom will hold 50% share in Aircel Ltd. 

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