Reliance Communications (RCom) long-pending mobile tower sale deal may close next month. This mobile tower deal could bring down the company s debt by around Rs 19,000-20,000 crore. Anil Ambani-led Reliance Communications had agreed to merge its wireless telecom business with smaller rival Aircel to create the country’s 4th-largest mobile phone operator with an asset base of more than Rs 65,000 crore. At the end of June 30, 2016, RCom net debt stood at Rs 42,071.2 crore. The total debt is estimated to be around Rs 47,000 crore after paying for the spectrum auction. Also Read - RCom to go for insolvency resolution process after failure to repay debtAlso Read - Reliance Communications completes sale of fibre assets to Reliance Jio
We were waiting for Aircel transaction to consummate… We have stated that we have done necessary due diligence and we are at advanced stages of closure of tower transaction which we hope to conclude in October, said RCom CEO for Consumer Business Gurdeep Singh during an investor call today. The 20,000 crore debt (out of about Rs 47,000 crore of RCom) will go away with this deal. Then, there will be tower proceeds. At this point of time, it is not possible to give exact valuation of the tower deal. This is an approximate estimate. Residual debt will be Rs 9,000 crore with little plus-minus, an RCom official said.
On the other hand, Aircel is planning to sell its 2,000 mobile towers to lower its debt load to Rs 14,000 crore from around Rs 18,000 crore before closure of merger deal with RCom. Aircel owns 2,000 towers. Those 2,000 towers will not be part of the merged company. As you know, Aircel has Rs 18,000 crore (debt) on their balance-sheet. At the time of merger, they would be paying off Rs 4,000 crore to bring it down to Rs 14,000 crore. That would happen by sale of their BWA spectrum and 2,000 towers, an RCom official said during the call.
RCom and Aircel have agreed to transfer Rs 14,000 crore each of their bank debt to the merged entity, which will be re-branded as a new company. Besides these, both will transfer their pending payment for spectrum that they acquired during different auctions. The merged entity is going to have a total of Rs 28,000 crore of bank debt and combined deferred spectrum liability of around Rs 7,000 crore. This will make a total debt of merged company at around Rs 35,000 crore, the RCom official said. ALSO READ: Reliance Communications Q1 profit grows 5.8 percent at Rs 54 crore
However, another RCom representative clarified that on the day of consummating the deal, the debt in the books will be only Rs 28,000 crore. He said spectrum payment installment is due in books of the Department of Telecom and the merged company will not be raising any debt for paying those pending installments. In the largest consolidation in the country’s telecom sector, RCom and Aircel will hold 50 percent each in the new company. The board of the new company will have equal representation from the two sides. ALSO READ: Reliance Communications and Aircel announce merger, to create Rs 65,000 crore entity in largest-ever consolidation deal in telecom sector