(Sistema was in talks to acquire…)
MUMBAI: Russia's Sistema and Malaysia's Maxis Group have shelved talks for a possible buyout of Indian telecom operator Aircel after inconclusive negotiation on price and a recently failed government auction of airwaves, said two people close to the deal.
The Russian conglomerate, which offers services here under the MTS brand, was in talks to acquire unlisted Indian telecom operator Aircel, majority owned by Malaysia's Maxis, in a deal valued around $3 billion (Rs 16,000-17,000 crore).
"But talks went cold shortly after the November auction failed," said one of the persons. In an e-mailed response, both Sistema and Aircel denied any talks of a merger. "Sistema Shyam TeleServices Ltd (SSTL) has time and again maintained that there were are no plans of acquiring any telecom service provider."
Sistema, whose mobile permits were quashed by the apex court last year, is learnt to be evaluating the possibilities of getting back its licence in the upcoming spectrum sale in March.
Sistema is also awaiting the outcome of its review petition that it has filed in the apex court over the cancellation of its permits. The company has also challenged the Supreme Court revoking its mobile permits under the bilateral agreement between India and Russia.
One of the persons also said that the term for which Maxis would stay invested in Aircel was a sticky subject in the negotiations.
Aircel was held under multiple companies of the Maxis Group which underwent a nine-month long restructuring process to simplify the holding pattern for suitors.
Sistema, which offers mobile services on the CDMA-technology platform in India, did not take part in the November auctions.
The CDMA auction in the 800 MHz band were cancelled after both potential bidders, Tata Teleservices and Videocon, withdrew their applications citing the high reserve prices. The minimum price for these airwaves had been set at 1.3 times that of GSM spectrum in the 1800 MHz band.
This resulted in the government restricting the sale to only GSM airwaves in the 1800 MHz band - this too turned out to be a damp squib with the Centre getting less than a fourth of its revenue target of Rs 40,000 crore as there were no takers for about 57 per cent of the airwaves that were put on sale.
Last month, the Cabinet halved the reserve price for CDMA airwaves in the 800 MHz band in a bid to salvage the sale of these airwaves. Sistema had welcomed the price reduction but said it expected a greater cut.
Prior to the reduction in the base price for CDMA airwaves, it would have cost Sistema about Rs 14,000 crore to get back a pan-India permit. An acquisition of Aircel at an equal price was deemed value for money.
The same no longer holds true since spectrum will now be cheaper and MTS may be able to reuse some of its agreements and network that's already in place, said an expert.
Post the reduction, CDMA telcos would have to shell out 1,820 per unit of airwaves and since a company like Sistema can bid for a maximum of 3.75 MHz, this translates to Rs 6,825 crore for the local arm of the Russian company.
But the company will be required to pay only a fourth of this upfront and the rest can be paid in ten equal installments after a two-year moratorium.
If Sistema wins pan-India airwaves, it will have to pay Rs 1,706 crore upfront, but the actual outgo may be around Rs 200 crore as it is slated to get a refund around Rs 1,500 crore, the entry fee it had paid in 2008."The decision by the Cabinet to reduce the CDMA reserve price by 50 per cent clearly reflects the growing realisation that demand for 800 MHz is very limited. The decision taken is a step in the right direction. However, as per ground realities, one would have expected much greater reduction," Sistema said in an e-mail to ET.
Aricel was caught in the middle of a major controversy in 2011 after the CBI started probing Maxis' purchase from the C Sivasankaran group in 2007, making its promoters keen on a stake sale.
The company has been upset with the way the investigating agencies had dragged its billionaire-owner T Ananda Krishnan and other top officials into the probe surrounding the circumstances under which the Malaysian company acquired Aircel from serial entrepreneur C Sivasankaran for $1.8 billion in 2005.
The CBI is probing Sivasankaran's charge that he was forced to sell Aircel to Maxis by former telecom minister Dayanadhi Maran and that the Malaysian company's subsidiary made a quid pro quo investment of Rs 550 crore in a DTH company owned by the Maran family in return for the ex-minister's role in the Aircel transaction. Maran and Maxis have vehemently denied all wrongdoing.