GCX owner RCom looks for ways to cut $6.8bn debt after merger deal is cancelled
Indian operator Reliance Communications (RCom) is looking for ways to reduce its debt of 450 billion rupees ($6.8 billion) after the collapse of its plan to merge with rival operator Aircel.
RCom announced on Sunday that the year-old deal – which would have helped pay off more than half of the debt – was being “allowed to lapse by mutual consent”.
The company will now focus on the domestic and international business-to-business market, said RCom, which owns subsea cable operator Global Cloud Xchange (GCX).
The company blamed “inordinate delays caused by legal and regulatory uncertainties” and “various interventions by vested interests” for the end of the Aircel deal, even though the proposals seemed to be progressing through the regulators.
It added that there was “unprecedented competitive intensity in the Indian telecom sector, together with fresh policy directives [that were] adversely impacting bank financing for this sector” and said that these factors “have also seriously affected industry dynamics”.
The business market generates “equal revenues from domestic and overseas operations”, said yesterday’s statement. “As part of the ongoing transformation and in order to enhance value for all stakeholders, the RCom board reaffirmed the focus on these stable, capital light B2B businesses which have sustained and predictable revenues and profits, with immense growth potential.”
But at the same time the company is moving ahead on other ways to reduce its debt. Canadian private equity investor Brookfield Asset Management had already agreed to buy a stake in RCom’s tower infrastructure business and this is going ahead, as well as a separate mobile merger with Sistema Shyam Teleservices, which operates as MTS India. That merger is “expected to be completed this month”, said RCom.
The company is trying to sell real-estate assets in New Delhi and Mumbai, it said.
RCom followed up the announcement by promoting a number of senior executives to board-level positions. Punit Garg, president of the telecoms business, will join the board as an executive director, as will the CFO, Manikantan V, while infrastructure chief Suresh Rangachar will be executive director of Reliance Infratel.
Gurdeep Singh, co-CEO of RCom and head of the mobility business, will be executive director of Reliance Telecom. There is no change respecting Bill Barney, head of GCX and the other co-CEO of RCom.