RCom May Sell 26 Percent To Foreign Telco
Reliance Communications (RCom), the country’s second largest telecom company by subscribers, is in talks with various strategic players to sell a 20-26% stake. The deal in talks will be in two phases, beginning with a purchase of shares from secondary markets followed by issue of fresh shares through preferential allotment, reports Economic Times.
The funds can be used in the upcoming government auction to acquire 3G spectrum and network rollout. RCom may have to spend more than $500 million for the spectrum and shell out another $1 billion for setting up the network. RCom also has plans to buyback its foreign currency convertible bonds, which can cost up to $650 million.
ADAG’s RCom is the only major telecom operator in India which does not have a foreign partner. The deal may lean more towards secondary market purchase of shares as promoters of RCom, who hold a 67% stake, are not interested in diluting much of their stake. Life Insurance Corporation is one of the biggest institutional shareholders in the firm and has a 5% stake.
There are a number of foreign telcos that are looking to enter India as it remains one of the fastest growing telecom markets in the world. Those likely to be interested are France Telecom (NYSE: FTE), Deutsche Telekom (NYSE: DT) and Telecom Italia. UAE’s Etisalat and Norway’s Telenor have recently entered Indian market by buying into Swan Telecom and Unitech Wireless respectively. Others like US-based telecom firms AT&T (NYSE: T) and Verizon (NYSE: VZ) may also be interested.
The talks of an RCom deal comes after Japan’s NTT DoCoMo (NYSE: DCM) acquired a 26% stake in Tata Teleservices (TTSL) in a deal that valued the CDMA operator at around $9 billion. The report said that RCom may expect a valuation of $18-20 billion as it has double the number of subscribers compared to TTSL. This will be double the present market valuation of RCom, whose marketcap was nearly $9.5 billion on close of trading on Wednesday.
RCom and TTSL are the telecom companies which operate in India through a CDMA platform, and both the companies are planning their GSM foray. RCom may use the funds to cover the costs of setting up of the infrastructure required for its GSM launch. It has already raised $400 million from Canada’s export credit agency, Export Development Canada, to purchase telecom technology and services from Canadian suppliers for GSM foray.
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Comments (6)
Dec 11, 2008 11:06 PM
Rising fund by selling stake is better then taking a big loan from the bank during this period of time, but if Rcom do gain the government auction to acquire 3G specturm and network rollout, more fund is need to setting up the network, that a long road ahead but if everything do manage to be put into place, it should be very profitable
Dec 12, 2008 8:11 AM
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Dec 19, 2008 12:46 AM
I think this is a good move.Selling stakes to foreign companies can help RCOM become competitive as these companies can lend some expertise and collaborate on technology sharing with RCOM.This is a win-win situation for both parties involved
Jan 8, 2009 1:40 PM
nice move .. but only time will tell how good it is
Mar 8, 2009 10:10 AM
In this article is an interesting statement [...There are a number of foreign telcos that are looking to enter India as it remains one of the fastest growing telecom markets in the world.]. I agree with the statement.
However, this article was first published recently in december 11, 2008. Today it’s been only 3 month ago. Today the world seems to be totally upside down, with the Financial Crisis everywhere. I would like to know which Telco still can afford to step into the interesting telecom market. of India. Thanks for sharing, Jan Eelco
Mar 21, 2009 3:31 AM
Decision must have been taken due to recession.You know what happened to other big names.SEO Tips