2 September 2019: The assets of Reliance Communications (RCom) and its two units, including spectrum and towers, are expected to fetch ₹9,000- ₹10,000 crore, people familiar with the matter said, likely leaving financial lenders staring at a steep haircut given their combined claims of over ₹49,000 crore.
“The initial valuation shows that the assets should fetch at least ₹9,000-₹10,000 crore, if the insolvency proceedings complete within the next few months,” said one of the people directly involved. “The value of a telecom firm’s assets, especially spectrum, shrinks with time and all approvals need to come in place for a successful sale.”
In the ongoing insolvency process for RCom and its two units — Reliance Infratel and Reliance Telecom — assets up for sale include airwaves in the 850 MHz band—to be used for 4G — in 14 of India’s 22 telecom circles, about 43,000 telecom towers and some fibre.
Those that have shown interest in the assets include mobile phone operators Reliance Jio and Bharti Airtel; tower firms like ATC Telecom Infrastructure; asset-restructuring firms such as Asset Care & Reconstruction Enterprise Ltd and UV ARC; private equity firm TPG Asia VII SF Pte; and India Infrastructure Fund II.
The companies mentioned above did not respond to ET’s queries while TPG declined to comment.
As many as 53 financial lenders have raised claims of about ₹57,382 crore, of which ₹49,223.88 crore had been verified by RCom’s resolution professional (RP), Deloitte.
Top Indian financial lenders include State Bank of India with a verified exposure of over ₹4,800 crore, Bank of Baroda (over ₹2,500 crore), Syndicate Bank (over ₹1,225 crore) and Punjab National Bank (nearly ₹1,127 crore). Top overseas lenders include China Development Bank (nearly ₹9,900 crore), Exim Bank of China (over ₹3,356 crore) and Standard Chartered Bank (Mumbai and London, over ₹2,100 crore).
Another person said that the resolution professional is trying to wrap up the insolvency proceedings by mid-October.
“We are bound by confidentiality obligations and are unable to comment on client-specific matters,” said a Deloitte spokesperson in response to ET’s queries.
The person added that the companies that have expressed interest have started their due diligence into the assets, but the main stumbling block in way of the successful sale of assets as part of the overall insolvency process remains spectrum, the most valued asset.
Like Aircel, another telco that’s undergoing bankruptcy resolution, RCom is embroiled in a battle with the telecom department over ownership of spectrum in the National Company Law Tribunal (NCLT).
The government wants both telcos to return the airwaves, which it regards as a national asset, since they haven’t been paying fees or dues. The telcos say they bought the spectrum at auction and, since it’s within the validity period, the operators have the right to sell it to another party and repay financial lenders, many of which are state-run entities.
RCom holds the licences for 850 MHz 4G spectrum, which will expire in July 2021. Any delay will see its value drop further. Any order in favour of the Department of Telecommunications (DoT) will hit the asset-sale process, and thus, lenders.
In an earlier deal to sell wireless assets to Reliance Jio, which collapsed last year after it wasn’t cleared by the telecom department over unpaid dues, RCom was supposed to sell the spectrum for ₹7,300 crore.
Besides banks, operational creditors such as tower companies, equipment vendors and DoT are facing losses as well. They have claimed nearly ₹30,000 crore in dues, of which over ₹21,000 crore has been verified. For example, in the case of Aircel, the resolution plan has earmarked just about ₹16.5 crore for hundreds of operational creditors, which had claimed about ₹20,000 crore in dues.