RCom plans asset sales to cut debt by 37% in a year

New Delhi: Telecom operator Reliance Communications plans to cut down expansion cost and hive off some assets in its bid to to reduce debt by about 37 per cent to Rs 25,500 crore in the next 12 months.

The Anil Ambani-led company plans to use the key infrastructure– mobile towers and optical fibre– of his elder brother Mukesh Ambani’s company Reliance Jio Infocomm for future expansion rather making its own fresh investments.

It will also have tight leash on its expenditure.

[caption id=“attachment_75516” align=“alignleft” width=“380”]  Anil Ambani. Reuters[/caption]

“As a part of our reciprocal arrangement with (Reliance) Jio, the tower and fibre asset will come from Jio side. We will invest only in electronics,” RCom President and CEO Gurdeep Singh said in a discussion with financial firms.

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The two brothers after being apart for about 8 years had joined hands in April 2013 for business co-operation of their telecom firms Reliance Jio and RCom to utilise existing and future infrastructure of both companies on reciprocal basis, including optical fibre, towers and related assets.

“Any future expansion that RCom will do on wireless side will be tower and fibre coming from Jio in reciprocal or if we see any other more economical viable model to expand in those markets. In times to come you will see lower capex to sales ratio,” Singh added.

RCom had net debt of about Rs 40,222.6 crore at the end of June 30, 2014. The company in the first week of July had raised about Rs 4,800 crore in a QIP that was used to reduce debt to about Rs 35,000 crore.

A company representative said that the the interest outgo on debt is expected to come down by Rs 600 crore annually after the qualified institutional placement (QIP).

The company also expects to finalise the long pending deal to sell a significant stake in its international submarine optical fibre company Global Cloud Xchange, formerly Reliance Globalcom, in the next 3-4 months, Singh said.

RCom is also working to realise money from its real estate assets in Mumbai and Delhi which are valued at about Rs 5,000 crore, Singh said.

The company expects to complete delivery of its mobile tower service to Reliance Jio soon that will fetch RCom about Rs 12,000 crore over a period of time. The company will securitise this with banks to raise about Rs 6,000 crore.

Thus overall debt should come below Rs 25,500 crore in the next 12 months, Singh said.

RCom will also move mobile tower equipment from areas where it has less than 7 per cent market share to other areas where it needs to build capacity.

The company will enter in to intra-circle roaming agreement with other operators present in areas from where RCom plans to move its mobile tower equipment.

“This is not a site movement but BTS (base transceiver) movement, whether GSM or CDMA. I am taking them to profitable areas. They were barely able to meet network cost,” Singh said.

RCom’s 7 licences are coming up for renewal in 2015 and will have to buy spectrum afresh to continue business through these permits.

A company representative during discussion said that impact will not be much as the 7 permits coming up for renewal lie in B and C categories circles where spectrum price are lower compared to that in metros and A category service areas.

PTI