RCom exits wireless business to cut debt

Anil Ambani, chairman of Reliance Communications addressing a press conference in Mumbai. (PTI Photo)Anil Ambani, chairman of Reliance Communications addressing a press conference in Mumbai. (PTI Photo)
MUMBAI: Reliance Communications (RCom) chairman Anil Ambani on Tuesday said the company will resolve its outstanding debt issue with lenders by selling its spectrum, cell towers, optical fiber network and real estate properties. This will result in RCom exiting the wireless telecom business and paring its debt to Rs 6,000 crore from Rs 45,000 crore.
While it has been widely speculated that Ambani’s senior sibling Mukesh’s Reliance Jio would be a buyer of spectrum, towers and fiber assets, Anil did not name the likely buyers. He, however, said the bidding process was carried out under the oversight of an independent panel chaired by S S Mundra, former RBI deputy governor.

Ambani also said RCom is working with all its lenders to sell its varied assets, including property, except the flagship Dhirubhai Ambani Knowledge City campus in Navi Mumbai. All the transactions are expected to be concluded in a phased manner between January and March 2018. The chairman added that there will be ‘zero’ loan write-offs for lenders and ‘zero’ conversion of debt to equity. The announcement led to a 31% surge in RCom’s stock to close at Rs 21 on the BSE on Tuesday.

Anil Ambani will be the latest to exit the consumer mobile services business after the Tata Group announced its departure in October. The developments are reflection of rapid shakeout in the telecom sector, following the entry of Reliance Jio. Mounting losses forced RCom to shut down its 2G and 3G wireless business. RCom had a customer base of 120 million as of December 2016, which declined to 75 million by August 2017 and further to 14 million by December. Jio launched its services in September last year, offering free voice calls and dirt-cheap data plans, thus disrupting the country’s telecom market.

“Competing in wireless will require a pipeline into the RBI’s printing press…It is a guzzler of currency. It has engulfed many people and many companies,” said Ambani.RCom said it has received 15 non-binding bids for its range of assets and it is now in final stages of negotiating definitive agreements. Deals will bring Rs 25,000 crore to the table, which will be used entirely to pay back lenders, including China Development Bank. The Chinese bank had moved NCLT to start insolvency proceedings against RCom to recover its dues.
“We have achieved a resolution that involves RCom exiting the SDR framework,” said Ambani, who returned from Beijing on early Tuesday morning after a meeting with Chinese lenders. He said dispute with the Chinese institutions have been resolved by granting them a status on a par with secured lenders and that foreign bondholders would also be repaid.About Rs 14,000 crore will come through the commercial development of DAKC and a stake-sale in RCom’s remaining (business-to-business) operations, including data centres and submarine cable network. The balance debt on RCom’s books will then be Rs 6,000 crore.