Telecom operator Reliance Communications is looking to close its long-pending mobile tower sale deal next month that may bring down its debt by around Rs 19,000-20,000 crore.
“We were waiting for Aircel transaction to consummate… We have stated that we have done necessary due diligence and we are at advanced stages of closure of tower transaction which we hope to conclude in October,” said RCom CEO for Consumer Business Gurdeep Singh during an investor call today.
Anil Ambani-led Reliance Communications on Wednesday agreed to merge its wireless telecom business with smaller rival Aircel to create the country’s 4th-biggest mobile phone operator with an asset base of more than Rs 65,000 crore.
“The 20,000 crore debt (out of about Rs 47,000 crore of RCom) will go away with this deal. Then, there will be tower proceeds. At this point of time, it is not possible to give exact valuation of the tower deal. This is an approximate estimate. Residual debt will be Rs 9,000 crore with little plus-minus,” an RCom official said during the call.
On the other hand, Aircel is planning to sell its 2,000 mobile towers to lower its debt load to Rs 14,000 crore from around Rs 18,000 crore before closure of merger deal with RCom.
“Aircel owns 2,000 towers. Those 2,000 towers will not be part of the merged company. As you know, Aircel has Rs 18,000 crore (debt) on their balancesheet. At the time of merger, they would be paying off Rs 4,000 crore to bring it down to Rs 14,000 crore. That would happen by sale of their BWA spectrum and 2,000 towers,” an RCom official said during the call.
At the end of June 30, 2016, RCom net debt stood at Rs 42,071.2 crore. The total debt is estimated to be around Rs 47,000 crore after paying for the spectrum auction.
Both the companies have agreed to transfer Rs 14,000 crore each of their bank debt to the merged entity, which will be rebranded as a new company.
Besides these, both will transfer their pending payment for spectrum that they acquired during different auctions.
“The merged entity is going to have a total of Rs 28,000 crore of bank debt and combined deferred spectrum liability of around Rs 7,000 crore. This will make a total debt of merged company at around Rs 35,000 crore,” the RCom official said.
However, another RCom representative clarified that on the day of consummating the deal, the debt in the books will be only Rs 28,000 crore.
He said spectrum payment instalment is due in books of the Department of Telecom and the merged company will not be raising any debt for paying those pending instalments.
In the largest consolidation in the country’s telecom sector, RCom and Aircel will hold 50 per cent each in the new company. The board of the new company will have equal representation from the two sides.
The merged entity has plans to invest USD 1 billion after its incorporation.
“We have received enough interest from international investors for the merged entity as the deal has been announced. We are looking at USD 1 billion of investment into the company. It will raise another billion from bankers as well if need arises for expansion,” RCom President Punit Garg said.
The merged company will have a war chest for future capex expansion and most of the capex expansion will be data led, Garg added.
RCom today also announced transfer of its wireless business undertaking of its subsidiary Reliance Telecom (RTL) to Aircel and its subsidiaries.
The turnover of wireless business undertaking of RTL had a turnover of Rs 10,605 crore, accounting for 47.96 per cent of total turnover of RCom at the end of March 2016.
“Consolidation of the wireless telecom business of the Company and RTL with AL (Aircel) and DWL (Dishnet Wireless-Aircel) provides an opportunity to the company to acquire equity interest in AL,” RCom cited as one of the reasons for transferring RTL business to Aircel.
It said the transfer will further help in expanding the business of AL and DWL into growing markets of India, thereby creating greater value for the shareholders of AL and DWL.
The move will also reduce foreign holding in Aircel.
Aircel is majority owned by Malaysian firm Maxis Communications. Saudi Telecom, too, has stake in it.