Sistema backs out of Aircel acquisition talks

Sistema backs out of Aircel acquisition talks

Russian carrier Sistema has reportedly shelved plans for a possible acquisition of Indian operator Aircel.

Inconclusive negotiations on price and the recent disappointing government spectrum auction were key factors preventing a deal from going ahead, according to two people close to the deal speaking to India’s Economic Times.

The acquisition of the unlisted operator owned by Malaysia’s Maxis was valued at around $3 billion.

“Talks went cold short after the November auction failed,” said one of the sources. The terms under which Maxis would stay invested in Aircel was also a difficult subject in negotiations, another source told the publication.

Sistema and Aircel have denied any talks of a merger.

The Russian operator faces an uncertain future in India after losing its 2G licences in a decision by the Supreme Court last year then refusing to bid in a November auction.

Sistema is said to be considering taking part in a follow up auction in March to get back its licence and has also challenged the Supreme Court’s decision to revoke its licences under a bilateral agreement between Russia and India.

Sistema is one of a few operators in India using CDMA technology rather than GSM. The November CDMA auction was cancelled after both potential bidders Tata Teleservices and Videocon pulled out due to high reserve prices at 1.3times that of GSM spectrum.

The GSM auction was also unsuccessful raising less than a quarter of the Indian government’s revenue target.

Last month the CDMA spectrum reserve price for the March auction was halved and companies bidding will only have to pay a fourth of the amount upfront and the rest in ten installments over two years.

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