Mukesh Ambani's Reliance Jio has agreed to buy spectrum, towers and other wireless infrastructure of Anil Ambani's Reliance Communications in a bid to pull out his brother from a pile of loan defaults. But, it may subsequently mean a gradual increase in tariff.
Mukesh Ambani’s Reliance Jio has agreed to buy spectrum, towers and other wireless infrastructure of Anil Ambani’s Reliance Communications in a bid to pull out his brother from a pile of loan defaults. RCom has put its assets on sale for repayment of lenders’ Rs 45,000 crore loan. The Reliance Jio- RCom deal puts both brothers in a win-win position, but subsequently may lead to higher tariffs as well. Fitch Ratings has said that Reliance Jio’s recent plans indicated higher tariffs.
Nitin Soni of Fitch Ratings told CNBC-TV18 that the deal will bring in better fibre network for Reliance Jio without putting additional debt pressure on its parent company Reliance Industries. He also said that Reliance Jio will gradually increase tariff.
RCom on Thursday said that the company has signed a definitive agreement with Reliance Jio for sale of towers, MCNs and fibre, under which it will sell its 4G services and 43,000 towers to Reliance Jio. Other experts also say that the deal has placed Jio in a favourable position. COAI director general Rajan S Mathews said that the deal is clearly in line with the consolidation scenario in the telecom industry. “Emerging landscape of three dominant players in the telecom industry will be the new landscape,” he said.
Telecom experts estimate the Jio-RCom deal to be valued at between Rs 20,000 crore and Rs 25,000 crore. The exact amount of the deal has not been disclosed yet. Notably, as per the initial plan, RCom hoped to repay Rs 25,000 crore debt from two merger deals with Aircel and Brookfield of Rs 14,000 crore and Rs 11,000 crore respectively, both of which failed to take off. Interestingly, if the deal takes place at the valued price, RCom may be able to repay its domestic debt of Rs 25,000 crore just with this deal.
On the back of the deal between the Ambani brothers, RCom’s shares have more than tripled in the last 8 trading days. The buzz of Reliance Jio buying the assets of troubled RCom came around 18 December 2017, since then the share price of Reliance Communications has been on a rising streak. With a massive upsurge achieved in 8 trading days, shares of Reliance Communications have advanced about 253% to a 52-week high of Rs 41.77 on BSE.