Reliance Jio spent the holiday buying RCom’s wireless assets

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ITEM: Over the holiday break, Reliance Communications signed a deal to sell off its wireless assets to Reliance Jio Infocomm for an undisclosed amount, which will ostensibly beef up Jio’s wireless ambitions whilst helping RCom finally get its debt under control.

Under the deal, Jio gets 122.4 MHz worth of 4G spectrum in the 800/900/1800/2100 MHz bands; over 43,000 cellular towers; 1.7 million km of fiber across India; and 248 “media convergence nodes”, which provide around 5 million sq ft for hosting telecom infrastructure.

RCom said in a statement that Reliance Jio was the highest bidder for the assets. The company didn’t say how much the winning bid was, although sources told Reuters that the total value of the deal was close to 240 billion rupees ($3.75 billion). That includes a cash payment and the transfer of deferred spectrum payment instalments to the DoT.

RCom said all of the money from the “cash deal” would be used “solely for pre-payment of debt to its lenders.”

RCom’s debt issues have been hounding the company for some time. The wireless assets sale is the latest move by RCom to shed itself of other business units (such as its DTH business) to focus more on enterprise.

According to Reuters, just before the deal was announced, RCom said it had finalized a new plan to cut its debts by 390 billion rupees (just over $6 billion), leaving it with only around 60 billion rupees in debt. RCom’s debt has become enough of a problem that creditors such as China Development Bank have launched insolvency proceedings over missed payments, the Reuters report said.

The deal is the latest twist in the saga of the feuding Ambani brothers of Reliance Industries, Reuters notes:

A feud between the two brothers in 2005 led to the split of Reliance Industries, with Mukesh Ambani keeping the cash cow oil and gas business and Anil Ambani walking away with telecoms and power.

But Mukesh Ambani has re-entered the telecoms space with the launch of Jio in September 2016, upending the sector with cut-price data and free voice service and pushing RCom into a debt spiral.

Rajan Mathews, director general of the Cellular Operators’ Association of India (COAI), told PTI that the deal was good news for the mobile sector as it helps consolidate the mobile industry further around “serious players who have deep pockets and financial where-with-all to play effectively and delivery value to customers in future,” reports the Economic Times of India.

The deal is still subject to approval by RCom’s creditors, as well as the government. RCom says it expects the deal to be completed “in a phased manner” by March 2018.

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