Close
Close

Published

RCOM poised to exit Indian telecoms, squeezed by former stablemate

As one Reliance rises, the other falls. Reliance Communications (RCOM) is set to exit the Indian mobile market after 15 years, while its former sister firm, Reliance Industries (RIL), is growing rapidly after less than two years of commercial services. RIL’s mobile arm, Reliance Jio, is partly responsible for the wave of consolidation which has hit Indian MNOs including RCOM, as operators with already wafer-thin margins, and high spectrum and network upgrade bills, were hit by price wars unleashed by the disruptive new entrant.

Among the acquisitions that have ensued as the major MNOs huddled together for warmth, the merger of Idea Cellular and Vodafone, which will create a new market leader, is in the final stages of the approval process, according to telecoms secretary Aruna Sundararajan. The only remaining hurdles are clearance by the foreign investment and licence departments. The two companies said last week that Vodafone India’s COO Balesh Sharma is to be CEO of the combined business.

RCOM had hoped to build up its own economies of scale and improve its competitive weight by acquiring Aircel, but that was blocked by regulators, prompting it to sell much of its mobile business to Reliance Jio – with whom it already had significant infrastructure sharing and roaming agreements. Now it looks as though the firm will exit Indian telecoms altogether by selling the rest of its telco interests, including its national fiber network and its GCX (Global Cloud Exchange) unit.

The leading bidder is reported to be Russian-based Sistema, which sold its own stake in MTS India to RCOM last year and took a 10% stake. RCOM still owes it $300m from that agreement, which would be factored into the final price. Sistema is said to have bid $1.5bn, so the net price would be $1.2bn.

It is also possible that RCOM could sell its Indian fiber business, and GCX – which operates its undersea cables and other international assets – to separate buyers. The Financial Times has named US private equity company I Squared Capital and Hong Kong telco PCCW as being interested in some or all of RCOM’s assets, in addition to two other, unnamed organizations.

However, even the sale of the consumer and mobile business is not smooth sailing. On March 22, India’s Supreme Court refused to grant permission for the plan to go ahead, though it will hear the case again on April 5.

In addition, Ericsson has filed a lawsuit, claiming $156m in unpaid service fees from RCOM and an arbitration tribunal ruled that the Indian operator cannot complete its asset sales without permission.

Close