RCom to sell more assets, lower debt by 37% to Rs25,500 cr in a year

Telecom operator Reliance Communications is planning to hive off some assets and reduce roll-out costs over the next 12 years in order to reduce its debt by about 37 per cent to Rs25,500 crore.

The Anil Ambani-led company, which earlier sold its tower infrastructutre to elder brother Mukesh Ambani's Relianc Jio Infocomm, plans to sell of some other assets, including its stake in global undersea cable network as also some real estate assets as part of the debt-reduction exercise.

Reliance Communications will now increasingly fall back on the key infrastructure like mobile towers and optical fibre of Reliance Jio Infocomm for future expansion while at the same time cutting down on expenditure.

"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.

Reliance Communications and Reliance Jio Infocomm had in April last year signed a business cooperation agreement following the sale of RCom's tower business to Reliance Jio (See: Ambani brothers in Rs1,200-crore telecom infrastructure deal)

"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,'' Singh said, adding, ''In times to come you will see lower capex to sales ratio."

RCom had net debt of about Rs40,222.6 crore at the end of June 2014. The company had since raised about Rs4,800 crore in a QIP, which helped it reduce debt to about Rs35,000 crore.

This, according to company sources, has helped the company reduce its interest outgo on debt by Rs 600 crore annually.

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

Reliance Communications expects to finalise the sale of a significant stake in 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 Rs5,000 crore, Singh said.

The company expects to complete delivery of its mobile tower service to Reliance Jio soon that will fetch RCom about Rs12,000 crore over a period of time. The company will securitise this with banks to raise about Rs6,000 crore.

Singh expects RCom's overall debt to come below Rs25,500 crore in the next 12 months.

RCom's seven licences are coming up for renewal in 2015 and will have to buy spectrum afresh to continue business. These licences, however, lie in B and C category circles where spectrum prices are lower compared to that in metros and A category service areas.

For the quarter ended 30 June 2014 (Q1-FY15) Reliance Communications had 28.6 million data connections, following a reclassification of a mobile internet user as one that has used at least 1 MB over GPRS/3G during the period.

The telco's mobile data connection base grew by 7.1 per cent quarter-on-quarter (QoQ) from 26.7 million (reclassified) connections in the previous quarter.

Prior to the reclassification, RCOM had reported 37.4 million data connections in the previous quarter, which means that as many as 10.7 million mobile internet connections in the previous quarter had used less than 1 MB.