RCom shares tumble 7% after merger with Aircel scrapped; to revise mobile tower deal with Brookfield

By: | Updated: October 3, 2017 10:50 AM

Reliance Communication Ltd’s shares tumbled over 7.8% in an early trade on Tuesday after the company called off a proposed merger with rival Aircel .

RCom’s shares were trading at Rs 17.70 rupees, down 7.8% on Tuesday morning. (Image: Reuters)

Reliance Communications Ltd’s shares tumbled over 7.8% in an early trade on Tuesday after the company called off a proposed merger with rival Aircel, subsequently resulting in revision of its deal with Canada’s Brookfield Asset Management due to lack of additional Aircel tenancies. RCom’s shares were trading at Rs 17.70 rupees, down 7.8% on Tuesday morning.

RCom scrapped its merger with Aircel citing legal and regulatory uncertainties and interventions by various parties. The company is now reviewing its Rs 11,000 crore deal with Brookfield for 51% shares as the value Rcom’s mobile arm stakes will change due to lack of of addition Aircel tenancies, according to media reports. Brookfield, which is planning to buy Rcom’s mobile arm stakes, will reportedly pay less than previously agreed amount.

The Anil Ambani-led group had been trying to reduce its heavy debt by 250 billion rupees by merging its wireless business with Aircel. RCom’s net debt stands at 443.45 billion rupees (5.17 billion pounds) at the end of March.

Earlier this month, Ericsson India filed insolvency petitions against the debt-laden telecom company and its subsidiaries. The Swedish telecoms equipment maker, which signed a seven-year deal in 2014 to operate and manage Reliance Communications’ nationwide network, is seeking a total of Rs 1,156 crores from the company and two of its subsidiaries. Had the the National Company Law Tribunal (NCLT) admitted the insolvency petitions, it would have also blocked the way of RCom’s proposed merger with Aircel. Ericsson India, Chennai Network Infrastructure — a GTL subsidiary — and Bharti Infratel had objected to the merger.

Reliance Communications reported its third quarterly loss in a row last month. It is trying to find ways to cut debt after lenders gave it a reprieve on loan repayments until the end of 2017. Earlier this year, rating agencies Fitch and Moody’s downgraded Reliance Communications’ debt rating deeper into junk grade. Moody’s cut it to Caa1 from B2, while Fitch lowered its rating on the company to CCC, implying that some kind of default on the company’s debt is a “real possibility”.

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