RCom wireless sale to Jio ‘next week’ as GCX talks drag on

20 August 2018 | Alan Burkitt-Gray

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Reliance Communications hopes to complete its exit from India’s wireless market next week, but the company is still working on a sale of its subsea, enterprise and data-centre business.

Two parties have bid a reported $1.1 billion for the Global Cloud Xchange (GCX) subsea unit plus the other two sectors. One of them is I Squared Capital (ISQ), which bought HGC Global Communications for $1.9 billion last year.

However executives close to the negotiations are remaining tight-lipped about the progress.

Bill Barney, CEO of RCom and GCX, said the group expects to complete sale of RCom’s spectrum, towers and remaining consumer wireless business on 27 August – next Monday – “or a few days later”. The purchaser is an unrelated rival, Reliance Jio, under a deal that was announced in January for a reported $3.77 billion.

“We’re in the process of coming out of the long journey of shutting down the wireless business,” said Barney. After that RCom “will continue as a public company” and will continue to talk to potential bidders.

According to reports from India the two bidders left in the competition are ISQ and a consortium of three other US private equity groups, TPG, Blackstone and Värde. Both have bid the same amount, say reports.

It is understood that if RCom chose the ISQ bid, the result would likely be a merger of GCX with HGC Global Communications. However, Barney would not comment and Andrew Kwok, CEO of HGC, did not reply to a request for comment.

Barney would only say “No final bidder has been chosen”, without naming any of the bidders or speculating on the likely outcomes. One early interested party was the Russian industrial group Sistema, but it is no longer involved.

“We’re agnostic about the owner. No matter who owns [GCX] the strategy will be the same,” said Barney. Last year GCX announced a plan to build a new pair of subsea cables, Eagle East from Mumbai to Hong Kong and Eagle West from Mumbai to Sicily via the Middle East.

“The reality is we’re going to continue the [GCX] business” after the consumer wireless operation is taken over by Reliance Jio, he said. RCom and Reliance Jio are run by rival brothers, whose father Dhirubhai Ambani founded the family empire, before it was split after his 2002 death.

RCom was put into a joint lender forum (JLF) – a alternative reconstruction strategy to the Indian equivalent to the US bankruptcy code’s chapter 11 – after Reliance Jio wreaked havoc in the entire Indian mobile industry by cutting prices for its 4G-only network.

GCX, the enterprise business and the data centre business together account for only about 10% of the whole RCom business – so Reliance Jio will take over 90% of the operation next week.

It is not known how long RCom expects negotiations over GCX to take. One observer suggested September, but some feel that it may take longer, especially as the urgent debt position will be eased thanks to the sale of the consumer business to Jio.

Until last year’s investment in HGC, ISQ has focused on infrastructure projects in energy, utilities and transport. HGC was its first known telecoms investment, after CK Hutchison sold the international and carrier business of Hutchison Telecoms (HK)

Two members of the rival consortium have more experience of telecoms. TPG owns US cable companies such as RCN and Wave Broadband and it invests in Apollo Towers in Myanmar. Blackstone owns Phoenix Tower International, which last month bought Altice’s tower business in the Dominican Republic. Six years ago it became a shareholder in Ireland’s Eircom when a loan was converted into shares, but Blackstone later sold the stake. The third member, Värde, focuses on real estate and mortgages rather than telecoms and technology.