RCom approaches Tata Teleservices for possible merger

Reliance Communications has opened discussions regarding a potential merger with Tata Teleservices in order to strengthen its presence in India, where increased competition is driving a trend towards consolidation.

Talks are reportedly in their incipience after Reliance chairman Anil Ambani reached out to Tata Group regarding a possible merger. RCom is on track to complete a 50-50 merger with Aircel this year, and is also acquiring MTS, with the long-running deal set for resolution in March.

Once these deals have closed, the addition of Tata Teleservices to RCom’s offering would make it the third largest player in the market. However, there are potential stumbling blocks, including Tata Teleservice’s debt load and an ongoing legal dispute concerning NTT Docomo’s withdrawal from the operator, which was originally a joint venture between the Indian and Japanese groups.

Current market leader Bharti Airtel could soon lose out on the top spot, as number two Vodafone India is looking to close a merger with number three Idea Cellular. If this deal closes, it would push the combined entity into first place.

The trend towards consolidation in India has been prompted by the entry of Reliance Jio to the market. The newcomer has offered voice and data services at a very low cost, triggering price wars and spurring rival operators to shore up their offerings against the threat. The technique has proven successful, with Jio accruing 100 million subscribers within five months.

Rumours abound that Norwegian group Telenor is looking to pull out of India, with suggestions that it could be acquired by either Airtel or the RCom-Aircel entity.

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