Indian telecom company Reliance Communications unveiled a plan to reduce its debt burden by selling off assets to re-position itself as a niche operator targeting business customers, sending its shares soaring to a three-month high.
Anil Ambani, the company's chairman, yesterday announced the operator would sell-off telecom towers, spectrum, optical fibre and land, to reduce its debt to 60 billion rupees (Dh3.4bn) from its current level of 450bn rupees.
“The definitive talks are at an advanced stage of negotiation,” Mr Ambani said.
“The entire monetisation process is to be solely used to pre-pay the debt of the lenders.”
Rcom shares yesterday ended the day up more than 30 per cent following the announcement.
The restructuring process, which will not require any write-offs of debt or exchange of debt for equity, will be completed by March, he said.
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Upon completion, RCom will be relaunched as a much smaller company that will operate as a business-to-business firm, rather than a retail player.
RCom has faced headwinds because of mounting pressures in India's telecom space, following the launch of a new rival Reliance Jio in September 2016, owned by his older brother Mukesh. Jio's cut-price deals have prompted price wars, which have hit existing operator's profitability and forced mergers and consolidation in the overcrowded sector.
A planned merger between RCom and competitor Aircel fell through in October.
"This is a crisis of the wireless telecom sector and it has engulfed many, many people and many, many companies," said Mr Ambani.
“The writing was on the wall. You really need a pipeline into the Reserve Bank of India’s printing press if you want to be in the wireless business because it is a guzzler of currency.”
RCom was forced to shut down its wireless operations at the end of November after China Development Bank, one of its lenders, filed an insolvency case against the company.
Mr Ambani said that Rcom's restructuring plan would significantly reduce Indian banks' exposure to the telecom sector, which has been an area of concern for the Reserve Bank of India.
The transformed company's business will consist of services including 4G sharing with enterprises, its global subsea cable offerings, and its data centres. RCom had received “interest from global strategic to infuse further equity into the company”, which would help it further reduce its debt, Mr Ambani said.