Reliance Communications gets 7 months for debt servicing; to cut liabilities by 60 pcReliance Communications has close to Rs 45,000 crore debt on its books.
Reliance Group Chairman Anil Ambani on Friday said lenders had granted Reliance Communications a seven-month "standstill" on debt servicing, adding he was confident of reducing liabilities by 60 per cent with the completion of two transactions -- the Aircel merger and the tower assets sale to Brookfield.
"We had a meeting of all the lenders and presented our plans for strategic transformation, and I am happy to report that it was accepted. Reliance Communications, as a company, will receive a standstill on debt obligations for a period of seven months," Ambani told reporters at a press meet here.
"This is the largest-ever debt reduction by any company in India," he added.
Reliance Communications has close to Rs 45,000 crore debt on its books.
In granting the "standstill", the lenders have taken note of the "advanced stage of implementation of RCOM's strategic transformation programme" involving the two deals, the company said.
Ambani further said that RCOM would complete the Aircel and Brookfield transactions by September 2017, way before the deadline of December 2017.
He said the company would repay Rs 25,000 crore debt following completion of the two deals, adding that "there is no proposal to convert debt into equity".
Debt repayment from Aircel proceeds will be to the tune of Rs 14,000 crore and from the sale of the tower business it will fetch Rs 11,000 crore, he said.
RCOM is also working on plans for further deleveraging and servicing of its balance sheet, the company said.
It plans strategic transactions of its global/Indian businesses and data centres; strategic sale of its DTH business; monetisation of Dhirubhai Ambani Knowledge City and Delhi properties; monetisation of 49 per cent economic upside in the tower company and monetisation of 50 per cent stake in Aircel, in part or full.
Ambani said the company is looking for strategic deals for Global Cloud Xchange as well.
Ambani announced that the RCOM-Aircel merged company will be called Aircom and RCOM will hold 50 per cent stake in the new wireless entity.
While he expressed disappointment with the credit rating agencies that downgraded RCOM, Ambani said all efforts will be made to "restore credit rating at the earliest possible time".
On the larger ills plaguing the telecom sector, Ambani said: "I think when lenders look at the state of the telecom sector, they will be concerned. If you ask any lender will you lend to the sector? The answer will be yes, but no. And if they lend, the conditions will be very stringent. It is a right decision from their perspective."
Asked about RCOM's association with elder brother Mukesh Ambani's Reliance Jio with which it has both spectrum trading and sharing deals, Ambani clarified: "Jio is a separate entity and RCOM is a separate entity. We will continue with our spectrum trading and sharing. No other speculation is desirable."
He said the telecom sector as a whole is troubled and he would like to see the red light flashing in the sector to turn into amber and then green.
The company's Chief Financial Officer Puneet Garg, who gave an overview on the telecom sector's woes, said that due to the ongoing stress, the industry, which has already shed 10,000 jobs last year, is likely to see further job losses to the extent of 30,000 to 40,000 in the current year.
He said the sector has debts under three different categories. It has Rs 2.80 lakh crore bank borrowings, Rs 2.95 lakh crore debt due to spectrum purchase between 2014 and 2016, and another Rs 2 lakh crore from vendor financing and bond holders.
On RCOM, Garg said the company's net worth stands at Rs 27,500 crore with around 70,000 employees. It has spectrum worth Rs 20,000 crore and 43,000 towers. The number of wireless customers of the company stands at around 85 million.