Mukesh Ambani’s Reliance Jio Infocomm Ltd. agreed to buy spectrum, towers and other wireless infrastructure of his younger brother Anil Ambani’s Reliance Communications Ltd. that’s selling assets to repay lenders.
While the companies didn’t disclose the acquisition value, Anil Ambani had said earlier the assets were worth Rs 25,000 crore. The deal will include a cash payment and transfer of deferred spectrum instalment, the two companies said in separate statements.
Reliance Jio will acquire assets under four categories—towers, optic fiber cable network, spectrum and media convergence nodes—from the Anil Ambani-led firm.
That follows an asset monetisation process for RCom assets mandated by its lenders and managed by SBI Capital Markets Ltd. Reliance Jio emerged as the successful bidder in the two-stage bidding process. The transaction will close in a phased manner in the first quarter of calendar year 2018 and the proceeds will be used entirely for debt reduction, RCom said.
The deal is a “win-win” for both Ambani brothers, according to Prashant Singhal of consultancy firm EY India. The acquisition will help Jio further enhance its 4G capabilities, while allowing RCom to significantly lower its debt, Singhal told BloombergQuint in an interview.
If this deal is in the range of Rs 25,000 crore mark then that works very well for Reliance Communications. It helps cut down a lot of debt and doesn’t require any write-offs from the lenders.Prashant Singhal, National Head-Telecom, EY India
Singhal said that it would provide “comfort” to investors and help revive the rest of RCom. “This is exactly what Anil Ambani had mentioned two days ago,” he added.
Earlier this week, the debt-laden Reliance Communications had said that it will exit the strategic debt restructuring plan with a zero write-off to lenders. Anil Ambani had said that the company would reduce debt by monetising its wireless business and selling land parcels that the company owns.
Ambani's latest debt reduction plan comes after an earlier plan involving a merger with Aircel Ltd. and sale of its mobile towers business to Canada’s Brookfield Infrastructure failed to go through. Trouble mounted after shares of RCom fell below the agreed conversion price of Rs 24.71 per share. In November, the Anil Ambani company also defaulted on its outstanding dollar bonds – the first such default by an Indian company in 15 months.
However, Ambani, in the latest press briefing, assured investors that the “new” RCom will have a debt of just Rs 6,000 crore from around Rs 45,000 crore currently.