RCom to sell mobile, fibre assets to pay off debt

Indian operator to ditch consumer telecoms business, including mobile, and focus instead on enterprise and carrier markets

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Reliance Communications on Monday unveiled a debt restructuring plan that will see it sell off certain key assets, including mobile spectrum and fibre infrastructure, as part of a debt restructuring plan that will leave lenders with control of a new company with no exposure to the consumer mobile market.

The new RCom will have a reduced debt burden and will focus on the enterprise and carrier markets, RCom said.

Speculation over the future of the troubled Indian telco has been rife in recent weeks following the collapse of its plan to merge with rival mobile operator Aircel.

RCom had been relying on the 50:50 JV with Aircel to help it sort out its debt problem, thus the failure of the merger raised serious questions about its ability to continue operating. And last week Indian press reports claimed that RCom would close down its mobile business by the end of November, citing, amongst other things, the competitive pressure Reliance Jio Infocomm has exerted on the market since it launched a year ago.

That report appears to have been correct.

In a stock exchange filing on Monday, RCom detailed a restructuring plan under which it will convert 70 billion rupees (€928 million) worth of debt to 51% of its equity, essentially leaving lending banks with control of the company.

In addition, it aims to pay off INR170 billion of debt through the sale of mobile spectrum, telecoms towers, fibre infrastructure and media convergence node assets.

The telco was vague in its wording regarding what that means for the future of its mobile business, but ultimately it does spell the end for its consumer operations across fixed and mobile.

"The company has valuable spectrum across [the] 800/900/1800/2100-MHz spectrum bands ideally suited for 4G and other evolving technologies," it said. "While the company will continue with its 4G focused strategy, it plans to monetize its holding through trading and sharing arrangements."

And in a stock exchange announcement in response to last week's Economic Times piece, RCom said its "4G-led strategy will be executed, as at present, on the back of capital-light access to India's most extensive 4G mobile network, through already operational spectrum-sharing and ICR arrangements with Reliance Jio."

The debt restructuring plan also includes the sale of INR100 billion worth of real estate assets.

As a result, a new RCom will emerge with just INR60 billion of debt and a focus on the B2B market. This includes enterprise, carrier and Internet data centre operations, as well as a global submarine cable network.

"New RCom will rank among the top three data players in India," RCom said.

"These B2B businesses are stable, capital light and have sustained and predictable annuity revenues and profits, with immense growth potential amidst low competitive intensity," it added. "These businesses have no exposure to mobility and consumer business including fibre-to-[the]-home. They generate equal revenues from domestic and overseas operations."