Mumbai: Shares of Reliance Communications Ltd (RCom) on Tuesday fell as much as 12.8% after the company called off the merger of its wireless services operations with Aircel Ltd due to regulatory delays and opposition from some creditors.
The stock opened at Rs18.70 and touched a fresh all-time low of Rs16.75. At 1.57pm, it was trading at Rs16.85 on the BSE, down 12.24% from its previous close. So far this year, it has fallen 45%.
According to a Bloomberg report, RCom’s lenders, including State Bank of India, plan to meet as early as this week.
Analysts said this will further impede its efforts to pare its huge debt. As of March 2017, consolidated total debt of the company stood at Rs 49000 crore.
“It’s bad news for RCom coming at a time when Aircel deal has not gone ahead and even the Brookfield deal needs to be renegotiated. A debt led company struggling to manage its balance sheet has had a double whammy,” said Arun Kejriwal, director of Kejriwal Research and Investment Services.
Its USD 2020 bonds plunged 6.3 cents on the dollar to 47.5 cents at 11:25am in Hong Kong. RCom unit GCX’s 2019 bonds also fell 1.2 cents to 83.6 cents, according to a Bloomberg report.
Canadian alternative asset manager Brookfield will have to pay less than originally agreed for a 51% stake in RCom’s mobile tower arm to reflect the reduced value of the asset after merger talks between the Anil Ambani-controlled telecom firm and Aircel collapsed, Mint reported.
Brookfield had in December agreed to pay RCom upfront cash of Rs11,000 crore for a 51% stake in Reliance Infratel Ltd, in one of the largest foreign direct investments in India.
On Sunday, RCom said in a regulatory filing that the merger agreement with Aircel was allowed to “lapse by mutual consent”, due to regulatory delays and opposition from some creditors. In its filing to stock exchanges, the firm said it is looking at alternatives to reduce debt, including sale of real estate assets and “optimization of spectrum”.
RCom had signed binding agreements in September 2016 for the merger of its wireless assets with Aircel. RCom was expecting a transfer of Rs14,000 crore of debt to the merged entity.
The merger would have created one of India’s largest telecom operators in terms of subscriber base. According to the agreement, ownership of the merged entity would have rested equally with RCom and Aircel parent Malaysia’s Maxis Communication.
“The company is going through serious debt repayment challenges with deadlines that will force a firesale of its existing assets, mainly its realty and its tower business. With opposition of some creditors to the RCom merger with Aircel, the RCom asset sale seems imperative. However, in the midst of all this, it is also necessary for RCom to sustain customers and grow business in an highly disruptive mobile telephony market,” said N. Chandramouli, chief executive officer of TRA Research.
“Due to the failed merger with Aircel, RCom faces the customer’s depleting confidence and trust. The road to health is steeply uphill for RCom,” Chandramouli added.
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.