Anil Ambani announces new debt resolution plan for RCom

27 Dec 2017

Debt-ridden Reliance Communication (RCom) on Tuesday announced a new debt resolution plan with investment from a strategic investor that will allow it to exit an earlier strategic debt recast plan and reduce the company's Rs45,000 crore debt to a mere Rs6,000 crore.

Chairman Anil Ambani said with the new investment plan the company has achieved full debt resolution rather than partial debt resolution through debt restructuring.

Without any loan write-off, under the new strategic debt resolution plan, RCom will be repaying up to Rs17,000 crore loans out of proceeds from monetisation of spectrum, tower and fibre assets.

Anil Ambani said the deal involved an eight-stage asset monetisation process under an oversight committee headed by former RBI deputy governor S S Mundra with members from Trai and the whole process will be completed in 40 days flat.

The company, he said, will come on-board with a strategic investor but did not divulge the name of the new investor.

"With strategic debt restructuring (SDR) exit, new RCom to be transformed into B2B business," he added.

"The entire monetisation process is solely to prepay the debt of the lenders", Stating the objective of the resolution, Ambani said, adding that it involves zero write off to lenders.

Detailing the debt resolution plan, the RCom chairman said the process involves asset monetisation in the form of rationalising wireless business, effective from November.

He also confirmed a long overdue merger with SSTL. "We have completed longstanding merger with SSTL, gaining platinum spectrum for 4G and 5G, which is valid for 16 years," he said.

With mounting losses arising from a long-drawn price war in the telecom sector, the latest involving brother Mukesh Ambani's Reliance Jio Infocomm, and an unresolved debt restructuring plan, RCom had to partially shut down its telecom services.

China Development Bank last month initiated insolvency proceedings at India's National Company Law Tribunal (NCLT), saying a large amount of principal and interest from RCom was overdue.

RCom managed to remain a significant player in the mobile telecom market despite mounting losses. However, Mukesh Ambani's aggressive telecom foray with Reliance Jio has dampened any chances of RCom coming out of the debt trap.

Jio which made a disruptive entry in the telecom market with free voice calls and data at throwaway prices, and triggered a consolidation wave is also in the race to buy some of RCom's assets.

After Tata Teleservices, Sistema and Telenor, RCom is the latest to fade away in the consolidation wave.

RCom saw its subscriber market share plunge from 9.54 per cent in June 2016 (before Jio's entry) to 5.20 per cent in October 2017. Its revenue share, which was under 6 per cent in the second quarter of 2016-17, slid to less than 4 per cent by the first quarter of 2017-18.

With the writing clearly on the wall, RCom in October 2017 announced it was closing down its 2G and 3G services. In just a month, the company lost over 10 million customers.

While RCom's debt rose to over Rs45,000 crore with rising interest payouts, the company's losses crossed Rs2,390 crore in 2016-17. The company registered a loss of Rs2,821 crore in the September 2017 quarter amid lenders' deadline to restructure debt or face proceedings at the National Company Law Tribunal (NCLT).

Jio is now left with Airtel, Idea-Vodafone (which are getting merged) and BSNL to compete in the Indian telecom market.

Asset monetisation plan
To begin with, the company expects to monetise spectrum, towers, fibre in India and certain real estate assets for Rs25,000 crore. The company intends to monetise 122.4 MHz spectrum across all bands (800, 900, 1800 and 2100 MHz), 43,000 telecom towers, 1,78,000 route KM of fibre across the country and 248 Media Convergence Nodes (used for hosting telecom infrastructure).

The monetisation plans also include prime real estate located in New Delhi, Chennai, Kolkata, Jigni and Tirupati, but not that in Navi Mumbai.

Next, it would look at the commercial development of Dhirubhai Ambani Knowledge City (DAKC) campus, which comprises over 125 acres of prime real estate in Navi Mumbai. This the company expects to bring in around Rs 10,000 crore.

The complex – which is held by a Special Purpose Vehicle (SPV) - is already registered as an IT park, and is proposed to be commercially developed under the ''Integrated Information Technology Township'' Scheme of the Government of Maharashtra over the next 10 years, he added.

The process for identification of a joint developer for the project is being conducted by JLL, and has received an ''overwhelming'' response. A large number of leading international and domestic developers have expressed their keen interest in the project, and have submitted offers that are presently under evaluation, RCom said in a statement.

Further, RCom is also expecting a strategic investor to put in Rs 4,000 crore, that would help it further reduce debt.