RCom calls off Aircel merger; blames legal uncertanities, policy directives for delay
, ET Bureau|
Oct 01, 2017, 06.54 PM IST
MUMBAI: Reliance Communications (Rcom) has called off its merger with Aircel.
"Merger agreements with Aircel allowed to lapse by mutual consent," said the statement released by the Anil Ambani company. The reason given was "Inordinate delays caused by legal and regulatory uncertainties, various interventions by vested interests, policy directives impacting bank financing for telecom and changed industry dynamics," said the telco in its statement Sunday.
The merger with Aircel and its tower sale to Brookfield was expected to bring down the company's debt by 60%.
The statement added that Rcom will evaluate alternative plans for its mobile business through optimisation of its spectrum portfolio and 4G focussed strategy. The Ambani-owned company said that it expects monetisation of tower and fibre assets along with real estate along with optimisation of spectrum assets to generate proceeds of Rs 25,000 crore in debt reduction.
Its spectrum portfolio has a gross value of over Rs 19,000 crore . The total debt of the company stands at around Rs 42,000 crore.
In its AGM held on 26th of September, chairman Anil Ambani had said that the telco has been facing a slew of challenges including regulatory, legal and corporate rivalries, but won't be cowed down by efforts to blackmail it as it strives to close a merger and a stake sale to reduce its huge debt and stay solvent.
Ambani had then assured shareholders that the company has "multiple backup options" to revive RCom and said the company will have clarity about its future within this financial year through March 2018. He added that RCom, like the industry, is in severe stress due mainly to intense competition and said local and foreign banks have stopped lending to the sector, which is aggravating the troubles of a capital-hungry industry which needs Rs100,000 crores a year in capex.
The merger with Aircel had started on a troubled note from the start. Three of RCom's main lenders — China Development Bank, Standard Chartered Bank and HSBC — had objected to a petition seeking approval for the merger from being admitted in the NCLT. They eventually gave their consent but creditors in the form of Indus Towers, Ericsson, Department of Telecommunications (DoT), Bharti Infratel and GTL Infrastructure's Chennai Network Infrastructure objected, saying they had not been taken into confidence and their dues needed to be cleared.
In December 2016, RCom had announced two back-to-back transactions that would lower its debt to half and were expected to give liquidity to the otherwise cash-strapped telecom player.
According to Rcom's senior counsel in earlier court hearings , the merger would have prevented assets worth Rs 100,000 crore from being declared obsolete, and benefit 90 million consumers, 16,000 retail shareholders and 100,000 employees
RCom is currently undergoing strategic debt restructuring under which banks have stopped collecting interest for 210 days that end in December. Its Sunday statement added that the telco is in advanced discussions with banks for balance debt post de-leveraging and it continues to be under period of SDR till December end
"Merger agreements with Aircel allowed to lapse by mutual consent," said the statement released by the Anil Ambani company. The reason given was "Inordinate delays caused by legal and regulatory uncertainties, various interventions by vested interests, policy directives impacting bank financing for telecom and changed industry dynamics," said the telco in its statement Sunday.
The merger with Aircel and its tower sale to Brookfield was expected to bring down the company's debt by 60%.
The statement added that Rcom will evaluate alternative plans for its mobile business through optimisation of its spectrum portfolio and 4G focussed strategy. The Ambani-owned company said that it expects monetisation of tower and fibre assets along with real estate along with optimisation of spectrum assets to generate proceeds of Rs 25,000 crore in debt reduction.
Its spectrum portfolio has a gross value of over Rs 19,000 crore . The total debt of the company stands at around Rs 42,000 crore.
In its AGM held on 26th of September, chairman Anil Ambani had said that the telco has been facing a slew of challenges including regulatory, legal and corporate rivalries, but won't be cowed down by efforts to blackmail it as it strives to close a merger and a stake sale to reduce its huge debt and stay solvent.
Ambani had then assured shareholders that the company has "multiple backup options" to revive RCom and said the company will have clarity about its future within this financial year through March 2018. He added that RCom, like the industry, is in severe stress due mainly to intense competition and said local and foreign banks have stopped lending to the sector, which is aggravating the troubles of a capital-hungry industry which needs Rs100,000 crores a year in capex.
The merger with Aircel had started on a troubled note from the start. Three of RCom's main lenders — China Development Bank, Standard Chartered Bank and HSBC — had objected to a petition seeking approval for the merger from being admitted in the NCLT. They eventually gave their consent but creditors in the form of Indus Towers, Ericsson, Department of Telecommunications (DoT), Bharti Infratel and GTL Infrastructure's Chennai Network Infrastructure objected, saying they had not been taken into confidence and their dues needed to be cleared.
In December 2016, RCom had announced two back-to-back transactions that would lower its debt to half and were expected to give liquidity to the otherwise cash-strapped telecom player.
According to Rcom's senior counsel in earlier court hearings , the merger would have prevented assets worth Rs 100,000 crore from being declared obsolete, and benefit 90 million consumers, 16,000 retail shareholders and 100,000 employees
RCom is currently undergoing strategic debt restructuring under which banks have stopped collecting interest for 210 days that end in December. Its Sunday statement added that the telco is in advanced discussions with banks for balance debt post de-leveraging and it continues to be under period of SDR till December end
