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RCoM under financial pressure; to sell equity
TT Correspondent |  Mumbai |  07 Jun 2010

With its financial performance dwindling quarter-on-quarter as well as the financial outlay on a rise due to 3G spectrum payment, network rollout for 3G and expansion plans, Reliance Communications appears to be under financial pressure.

The company’s board approved a move to offload 26% stake in the company to strategic investors or PE investors.

 “The board of directors of Reliance Communications Limited has approved in-principle the induction of strategic / private equity investors into the Company for an up to 26% equity stake at an appropriate premium to the prevailing market price, and also to examine and pursue other appropriate strategic combination/ consolidation opportunities,” said an statement issued by the company.

Etisalat is reported to be in close talks with RCom. Last week, Mohammad Omran, chairman of Etisalat said that Etisalat was looking at several companies to buy a stake in an Indian operator.

Ironically for RCom it finds itself as the only operator especially amongst the incumbents to have no foreign strategic investor. The presence of strategic investor has tremendously helped operators such as Bharti Airtel (Singtel is the foreign strategic investor in Bharti) as it not only provides financial comfort but more importantly the experience of the foreign investor in areas of technology or service adoption is more helpful. Vodafone Essar, TTSL, Aircel and Idea along with Bharti have foreign strategic investors.

Coming back to the financials of RCom, it has a net debt of almost Rs.19,900 crore as on march, 2010. Recently it made a payment of Rs.8,585 crore towards 3G spectrum. It will also need some funds to rollout 3G network.

    
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07 Jun 2010(IST)  
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