RCom could sell assets to Reliance Jio, go virtual – Fitch

Reliance Communications could ink more spectrum selling and sharing agreements with Mukesh Ambani-controlled Reliance Jio, Fitch Ratings said, adding that the Anil Ambani company would end up as a mobile virtual operator after its ongoing restructuring.

RCom promoter Anil Ambani

Rcom “plans to monetise spectrum assets in the 800MHz, 900MHz, 1800MHz and 2100MHz bands by sharing and trading with other Indian telcos, most likely Reliance Jio, which is owned by Reliance Industries Ltd,” Fitch Ratings said.

The rating agency did not see much possibility of the Anil Ambani company trying to revive its business by rolling out its own 4G network.

“We expect Rcom to gradually exit from the wireless voice business and significantly scale down its operations due to intense competition. It announced that it will focus on offering 4G services as a mobile virtual network operator after selling its spectrum assets,” it added.

The company has already announced that it will give 51% stake in itself to banks and others who have lent money to it.

As a result, the company’s current promoter, Anil Ambani Group, will see its stake come down to about 26%, with the remaining being held by public shareholders.

The banks and other lenders will then try to bring in another promoter for the company by selling their 51% stake.

“Rcom expects the debt-to-equity conversion to happen before the end of 2017, although lenders would require their respective boards’ approvals to convert debt into equity,” said Fitch Ratings.

RCom owes about 45,800 cr to various banks and other creditors. Out of this, about 7,000 cr will be converted into equity, equivalent to a 51% stake. The move will value the company at just short of Rs 14,000 cr.

Fitch said it has not yet changed the ratings on the company. “We expect to re-rate Rcom once there is clarity on the execution of sale of its assets and the capital structure of the reorganised entity.”

On 30 October, Rcom announced a plan to restructure its INR458 billion (USD7 billion) of debt.

RCom will sell spectrum, tower and fibre assets for INR170 billion, and sell real estate of INR 100 billion (Rs 10,000 cr).

Rcom owns about 125 acres (50.5 hectares) of land in Dhirubhai Ambani Knowledge city (DAKC), in Mumbai, India and other real estate assets across eight cities in India. Rcom also owns 43,000 towers and 178,000 route km of inter- and intra-city fibre optic cables.

Last month, Rcom called off its plan to merge its wireless operations with Aircel Ltd, owned by Malaysia’s Maxis Berhad, citing regulatory and competitive reasons.

In the end, said Fitch, the company will become a B2B (business-to-business) bandwidth provider with three divisions – global submarine and cloud operations, an enterprise connectivity division and a data centre business.

(Now you can get topic-based alerts via WhatsApp)