PremiumThe deal appears to be a win-win for the brothers as Mukesh Ambani-led Reliance Jio gets most of RCom's assets, while the Anil Ambani-promoted firm will reduce its debt overhang substantially
New Delhi: Reliance Jio Infocomm Ltd will buy a majority of the wireless assets of Reliance Communications Ltd (RCom) in a deal that will give the Mukesh Ambani-controlled telecom operator access to valuable 4G spectrum and help his younger brother Anil repay lenders.
Both the companies, in separate statements, said that Jio has emerged as the highest bidder and signed binding agreements with Anil Ambani-run RCom for sale of wireless spectrum, tower, optical fibre network and media convergence node assets. Mint could not ascertain the value of the transaction.
The deal appears to be a win-win for both brothers as Jio gets most of RCom’s assets, giving it more firepower in its telecom business, while the Anil Ambani-promoted firm will reduce its debt overhang substantially.
“It would clearly help RCom address debt but for Jio it helps as it understands these assets; it understands both the current value and history of these assets far more intimately than any other suitor," said Mahesh Uppal, director, ComFirst India, a telecom consultant.
On Saturday, Mint reported that Jio had emerged as the highest bidder for RCom’s assets.
“These assets are strategic in nature and are expected to contribute significantly to the large scale roll-out of wireless and Fiber to Home and Enterprise services by RJIL (Reliance Jio)," Jio said in the statement on Thursday.
The acquisition is subject to receipt of requisite approvals from government and regulatory authorities, consent from all lenders, release of all encumbrances on the assets and other conditions, it added.
“The consideration is payable at completion and is subject to adjustments as specified in the agreement," it said.
Anil Ambani on 26 December said that his company had agreed to a new debt resolution plan that will see RCom sell its assets—spectrum, fibre, telecom towers and real estate other than Dhirubhai Ambani Knowledge City—and does not entail lenders and bond-holders writing off dues or converting it into equity. Through this process, he hoped to cut RCom’s debt by Rs39,000 crore from the Rs45,000 crore it owed lenders at the end of October.
According to the deal announced on Thursday, RCom’s assets include 122.4 MHz of 4G spectrum in the 800/900/1,800/2,100 MHz bands over 43,000 towers, 178,000 RKM (route km) of fibre with a pan-India footprint and 248 media convergence nodes covering five million sq. ft, used for hosting telecom infrastructure.
The deal with Jio does not include RCom’s real estate assets. RCom is also left with around 134 MHz of spectrum assets for which it is understood to have found other bidders.
“The RJio deal consideration comprises primarily of cash payment and includes transfer of deferred spectrum instalments payable to the Department of Telecommunications . The company (RCom) will utilize the proceeds of the monetization of this cash deal solely for pre-payment of debt to its lenders," RCom said in the statement.
The two companies already had agreements for sharing of tower infrastructure and fibre network, apart from spectrum-sharing pacts.
RCom’s shares surged 7.72% to Rs30.96 on BSE, while the exchange’s benchmark Sensex shed 0.19% to 33,848 points. Shares of Reliance Industries Ltd gained 0.23% to Rs924.40. The announcement was made after the end of trading on Thursday.
The tariff war initiated by Jio fast-tracked consolidation in the telecom sector. Vodafone India Ltd and Idea Cellular Ltd announced a merger earlier this year, and Bharti Airtel Ltd acquired assets of Telenor India, Tikona Digital and the consumer mobile business of Tata group.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.
