Anil Ambani's debt-ridden Reliance Communications (RCom) received a helping hand from brother Mukesh Ambanis' Reliance Jio as the two merged to announce a wide-ranging deal for spectrum, towers and optic fibre assets on their father, Dhirubhai Ambani's brthday. While the giants are yet to announce details of the size of their deal, it is estimated to be worth around £2.3 billion. The move comes as a major relief for Anil whose company was groaning under a debt of almost £4.5 billion, and was facing possible bankruptcy proceedings.
The deal also marks the exit of RCom from telecom space, a business Anil received in 2005 as part of a bitterly-fought family settlement with his brother. He had already stopped the company's consumer 2G and 3G operations at the end of November, deciding to continue with only the enterprise business as well as sale of assets. “RCom has signed definitive binding agreements with Jio for sale of wireless spectrum, tower, fibre, and media convergence node (MCN) assets... Jio emerged as the highest bidder in a transparent process conducted under the supervision of a high-powered Bid Evaluation Committee, comprising experts from banking, telecom and law,” the company said. It added that it expects the transactions to close in a “phased manner” between January and March 2018, subject to lenders' and other applicable approvals.
RCom said the deal comprises “primarily of cash payment” and also includes transfer of deferred spectrum instalments payable to the department of telecom. “The company will utilise the proceeds of the monetisation of this cash deal solely for pre-payment of debt to its lenders,” the statement said. The company was headed towards a shutdown in the face of mounting losses. It was under a strategic debt restructuring (SDR) and had been facing irate lenders.
Meanwhile, Jio said the deal would help the company expand its telecom business. “These assets are strategic in nature and are expected to contribute significantly to the large-scale roll-out of wireless and fibre-to-home (FTH) and enterprise services by Jio.” Anil said after completion of the revival process, the “new RCom” would only have debt of £600 million. He added that the company will only serve the low-capex and high-margin enterprise space from here onwards.
