Reliance Communications (RCom) is making yet another attempt to pare debt by offloading stake, this time in its enterprise business unit, Reliance Globalcom.
This follows a string of unsuccessful attempts – such as withdrawal of its submarine cable unit’s initial public offering and failed stake sale in tower unit – to raise funds.
On Friday, RCom, the telecom company controlled by billionaire Anil Ambani, confirmed it is in talks with Bahrain Telecommunications Co (Batelco) to sell stake in Reliance Globalcom.
“At this point, there can be no certainty that this will lead to a transaction. A further announcement will be made in due course if appropriate,” RCom said in an exchange filing. However, the company did not divulge any details, including the percentage of stake it intends to pare.
According to reports in a section of the media, Batelco is looking to acquire a majority stake in the company. It, along with a few West Asian funds, is said to have valued Reliance Globalcom at $1.3 billion.
Reliance Globalcom, which has over 65,000-km undersea cable network, provides managed network services to global clients.
“This is an attempt by RCom to trim its debt. There would also be an upside in the company’s stock price by 30-40 per cent on the news, and should even cross Rs 100,” Kishor Ostwal, Chairman and Managing Director at CNI Research, said.
However, this time again, it would not be an easy affair. “Globally, the voice and data market is under tremendous pricing pressure. With several multinational players also in the fray, there is immense competition and hence realisations are on the lower side,” Alok Shende, principal analyst and co-founder of Ascentius Consulting, said.
In September 2012, RCom said it expects to conclude the sale of its telecom tower business, Reliance Infratel, that had been dragging for quite sometime, next year.
Last year, the company had also withdrawn its $1-billion initial public offering plans for its submarine cable unit Flag Telecom, citing unfavourable market conditions. RCom had said Flag Telecom listing would happen when market conditions improve.
The company was expecting these moves to help it reduce overall debt by FY15.
“RCom generally has high expectations when it comes to valuations.
“The company’s more-than-Rs 37,000-crore debt is a big deterrent to interested investors,” a Mumbai-based analyst who did not wish to be named, said.