Reliance Communications’ decision to call off the merger plan with Aircel has raised a number of questions around the company’s ability to pare its debt of nearly ₹45,000 crore. It has also raised doubts on the proposed tower asset sale to private equity firm Brookfield.
Under the earlier plan, RCom was to park ₹14,000-crore debt from its balance sheet to the new company created post the merger with Aircel. In addition, RCom was to get ₹11,000 crore by giving 51 per cent stake to Brookfield. BusinessLine spoke to Punit Garg, President, Executive Director of RCom, to get answers to some of these questions.
We are in discussion with Brookfield. They continue to be currently committed to the deal. Of course, with the Aircel towers not part of the deal any more, there will be a different valuation. We are also looking at the possibility of retaining the current construct where we own part of the economic interest but also exploring them owning 100 per cent. Our current tenancy ratio is 1.87, this was supposed to go up post the Aircel deal. Obviously, this has changed and we have to be content with that.
Earlier you had said that the tower asset, combined with Aircel towers, will get you ₹11,000 crore for 51 per cent stake sale. What is the new valuation?
I am not guessing any number today. But what I can say is that by monetising our assets – including real estate, towers, spectrum, optical fibre — we would certainly be able to garner about ₹25,000 crore. Good part is that this asset sale is not dependent on regulatory approvals. So, we can have a definite timeline on this.
You had said that the asset sale would be completed by December. Are you sticking to that?
I am saying few months. If the process moves fast, it can happen by December 2017. When we announced the timeline in June we did not expect the opposition from companies like GTL, Ericsson Bharti Infratel. These were vested interest and frivolous objections. These issues delayed the entire process by three months.
These objections continue to be in place, so would it come in the way of your plans to sell other assets like tower?
No, it will not. Because now I am governed by the SDR. Unsecured lenders cannot derail process. For example, I can sell tower assets as a slump sale. We do not see any more problem.
Under the earlier plan, you were going to put ₹14,000 crore of RCom’s debt on the books of the new company formed post merger with Aircel. What happens to this?
Earlier plan was that we were getting ₹11,000 crore from the tower assets and ₹14,000 crore was to be transferred to the new company. So overall debt reduction from RCom balance sheet would have been ₹ 25,000 crore. I am sticking to that number under the new plan through the monetisation of other assets, including optimisation of spectrum.
So you will be more aggressive when it comes to spectrum sharing or trading.
I already have a spectrum sharing and trading with RJio. I have access to their 1,50,000 towers. Currently, spectrum sharing deal with RJio is for all of our 800 MHz spectrum. We will complete the merger with Sistema Shyam this month. So spectrum from this will also be available for sharing. We will also be optimising our spectrum in 1800 MHz and 2100 MHz band and these bands will also be available for sharing or trading not just with RJio but with other operators also.
Earlier you had said that the standstill from lenders is till December 2017. Now in the press release you say the standstill is till December 2018. Is there any change?
What we had said was that it was our intent to complete all the asset sale by December 2017. The standstill by lenders under SDR was always till December 2018 from day one.
Will lenders convert debt to equity?
We have enabled the lenders to exercise the right to convert debt into equity up to 51 per cent. Now, it is up to the lenders if they want to exercise the right. We have fulfilled our responsibility on this. We had consulted them on the Aircel deal.
What is the future of RCom as a standalone entity?
My business-to-business operation has little or zero competition. It is a profitable business. On the wireless part, we are moving to a more profitable area of 4G. I am moving away from loss-making 2G by optimising our spectrum.
4G will need lot of investments. How will you fund capex?
I have a spectrum sharing and passive infra sharing agreement with RJio. I have fibre of my own. Capex part is being taken care by RJio and I have a revenue share agreement with them. So ours is a capex light strategy. Capital expenditure guzzler is the voice networks while we are focussing on 4G. Since I am doing infra sharing. I have very little capital expenditure requirements.
Hopefully, over the next few quarters, we will spell out our strategy more in detail.