Big deal eludes this telco

Written by Rachana Khanzode | Updated: Sep 10 2010, 14:42pm hrs
Whats up with RComm The telco has been in the news for missing out on opportunities, whether it is M&As or fund-raising. RComm recently moved out of merger talks with tower firm GTL Infrastructure. A day later, Saudi Arabias Etisalat, which according to media reports was in talks with the firm to acquire a strategic stake in the company, said it was looking at other opportunities here in India. In 2008, RComm had missed out on a share swap deal with South Africas major MTN. This deal would have portrayed it as an international player and placed it in a position to give tough competition to its Indian rival Bharti Airtel in the South African market. Bharti recently managed to acquire Zain. At that time, RComm was supposedly to be in talks with AT&T and South Africas Zain as well.

RComm currently needs huge funds to do away with its Rs 33,000 crore debt, which includes Rs 8,500 crore it paid for 3G licences in 13 circles. Even when the Indian economy was going through a credit crunch, telcos didnt face issues relating to raising debt. Most of these are from the government banks. However, RComm wants to become a debt-free company in the next two years. The GTL deal was supposed to have reduced its debt by about Rs 18,000 crore. Analysts feel it would be difficult for RComm to get such a deal any time soon. RComm and GTL havent yet given reasons for the call-off. The media was abuzz with GTLs inability to raise funds and RComms increased expectations post the due diligence of assets. Bankers said the firms didnt agree on certain conditions that came up late in the day.

The telco has put up a 26% stake for sale. But bankers say that M&As are currently seeing a time-out because of lack of clarity on the regulations in the sector. RComm is claiming that it would continue to explore the IPO option for its tower arm, but it has been doing this for almost two yearsthe new DRHP filed with Sebi is valid until January 2010. Another option is to raise funds through QIP for about 15% of the companys stake. The firm is expected to put the resolution before the board in its AGM to be held by month-end.

rachana.khanzode@expressindia.com