Merger with Aircel called off, says RCom
ALTERNATIVE PLAN The telecom operator is now looking at other ways of cutting debt, including sale of the company’s realty assets
MUMBAI: Reliance Communications Ltd (RCom) has called off the merger of its wireless services business with Aircel Ltd, citing regulatory delays and opposition from creditors, in a development that will further impede its efforts to pare its huge debt.
RCom said it is now looking at alternative ways to reduce its debt, including sale of real estate assets and “optimisation of spectrum”, it said in a filing to stock exchanges on Sunday.
The merger of the wireless business with Aircel and a separate deal to sell RCom’s telecom tower assets was the cornerstone of the Anil Ambani-controlled company’s plan to pare its ₹45,000 crore debt, amid pressure on earnings because of aggressive tariffs offered by Reliance Jio Infocomm Ltd, controlled by his elder brother Mukesh.
The firm said that the merger agreement with Aircel was allowed to “lapse by mutual consent” as the deal had been facing regulatory delays and opposition from operational creditors.
RCom’s lenders had invoked strategic debt restructuring (SDR) for the telecom firm in June. SDR allows creditors to convert a firm’s debt into equity and take over the management.
The banks, however, allowed the firm to postpone debt-servicing payments till December after it presented a restructuring plan, involving the sale of its telecom tower business and the spinoff and merger of its wireless assets. In this standstill period, banks will not convert debt they are owed into equity and the firm’s debt will be classified as standard debt on the books of lenders. RCom stated that the “standstill period will continue till December 2018”.
The firm had signed binding agreements in September 2016 for the merger of its wireless assets with Aircel, the exchange notification stated. RCom was expecting a transfer of ₹14,000 crore of debt to the merged entity.
RCom is also looking to sell a 51% stake in its tower arm to Canada-based Brookfield Infrastructure. It expects to net ₹11,000 crore from the stake sale. On June 2,Reliance Group chairman Anil Ambani had said the two deals will help the firm reduce debt by 60%.
With the merger talks collapsing, the deleveraging process is likely to be delayed further. The plan to sell a majority stake in its tower arm remains intact, acompany spokesperson said.
The merger had been facing headwinds from various operational creditors as well as regulatory authorities. In September, the Indian unit of Sweden’s Ericsson filed insolvency petitions against the telecom company and two of its subsidiaries—Reliance Infratel and Reliance Telecom—before the National Company Law Tribunal (NCLT) in Mumbai to recover its dues worth ₹1,154 crore. The hearing for admission of the petition has been adjourned till October 6.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay highcourt over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.