Reliance Communications Ltd has decided to withdraw its plan to demerge its tower business, just a day after the company was in discussions with the Brookfield group to sell up to 100 per cent stake in its tower subsidiary instead of the 51 per cent it had earlier agreed upon.
Reliance Communications Ltd has decided to withdraw its plan to demerge its tower business, just a day after the company was in discussions with the Brookfield group to sell up to 100 per cent stake in its tower subsidiary instead of the 51 per cent it had earlier agreed upon, according to an agencies’ report accessed by CNBC TV18. The move comes in close on the heels of Reliance Communication’s failed merger attempt with Aircel, as the company scrapped the deal citing legal and regulatory uncertainties and interventions by various parties. The news channel reported the lawyer of Reliance Communications to have informed the National Company Law Tribunal about its decision to not demerge the tower business.
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.
CNBC TV18 had reported the failed merger attempt with Aircel was posing hurdles for the deal with Brookfield group. Earlier, Punit Garg, executive director of Reliance Communications, had said that RCom was expecting to garner Rs 25,000 crore from the sale of the tower business, some real estate and the fibre network. “It will be a mix of all three and some of them will happen and others will not. We are in no urgency, for instance, to sell all our real estate ” media reports quoted Punit Garg as saying.
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.
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”.