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Sistema drops plan to buy Maxis' stake in Aircel

The acquisition is shelved after differences regarding Maxis' continuing interest in Aircel after the acquisition, among other reasons. Both Sistema and Aircel deny a buyout was on the cards though.
Written by Jamie Yap, Contributor

Russian conglomerate Sistema and Malaysia's Maxis Group have reportedly shelved talks for a possible buyout of Indian operator Aircel, after negotiations on price were inconclusive following the failed November spectrum auction.

The Economic Times, citing an unidentified source close to the deal, reported Tuesday "talks went cold shortly after the November auction failed". In July last year, Sistema was reportedly interested in buying Maxis' stake in Aircel in a deal valued around US$3 billion.

Both Sistema and Aircel denied talks of a merger though, it stated. Sistema Shyam Teleservices (SSTL), the joint venture between Sistema and India's Shyam Group, has also repeatedly maintained they have no plans of acquiring a telecom service provider, the report added.

Sistema was reportedly interested in buying Maxis' stake in Aircel in a deal valued around US$3 billion.

The source said the term for which Maxis would stay invested in Aircel was a sticky subject in negotiations. Aircel was held under multiple companies of the Maxis Group, which underwent a nine-month restructuring process to simplify the holding pattern for interested suitors.

Sistema's Indian unit lost 21 of its 22 licenses when the Supreme Court revoked all existing 122 licenses of various telcos in February 2012, and is evaluating the possibilities of regaining its licenses at the upcoming spectrum auction this March, the report said.

The company is also awaiting on the outcome of a petition it filed with the Supreme Court last May to reinstate its revoked licenses, as well as cautioned that refusing to do so would threaten bilateral agreements between Russia and India, the report added.

GSM and CDMA licenses were originally put up for auctions in November 2012. Sistema Shyam did not participate in the CDMA auction, which eventually got scrapped after the two interested parties Tata Teleservices and Videocon pulled out.

The government in August 2012 had set the reserve price for 5 megahertz (MHz) of pan-India 1800MHz bandwidth at INR 140 billion (US$2.5 billion), while 5MHz of 800MHz bandwidth was INR 182 billion (US$3.3 billion). In January this year, the government halved the reserve price to INR 91 billion (US$1.6 billion) for CDMA airwaves to be sold during the next round of auctions scheduled for March 11.

Sistema welcomed the price reduction but expected a greater cut, the report said.

The Economic Times report also noted that prior to the reduced base price, it would have cost Sistema around INR 140 billion (US$2.6 billion) to reclaim its pan-India permits, making an acquisition of Aircel for around the same price value for money. But since CDMA spectrum prices are now cheaper, the proposed deal has lost some of its initial appeal, it added.

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