Reliance Jio Infocomm Ltd will raise as much as $2.2 billion in foreign currency debt to fund the purchase of Reliance Communications Ltd (RCom)’s wireless assets, according to two people directly aware of the company’s discussions with lenders.
While Reliance Jio hasn’t disclosed the value of the transaction to purchase RCom’s assets, the people cited above said that the deal would be funded through a mix of debt and internal accruals, reported Livemint.
Reliance Jio, a subsidiary of Reliance Industries Ltd (RIL), will receive funding support from the parent, said one of the two people cited above. “The modality of the fundraising is being worked out and no decision has been made yet.”
While requests for comments sent to RIL remained unanswered until press time, a senior company official who did not wish to be named said that all necessary approvals for the RCom deal were in place and the fundraising plans will be finalized in the next few weeks.
In December, Jio agreed to buy RCom’s wireless spectrum, media convergence node assets, 43,000 towers, and around 178,000km of fibre network for an undisclosed sum. The deal involves primarily cash payment and an assumption of the deferred spectrum payment liabilities of RCom to the telecom department.
In a January report, rating agency Icra Ltd said that any additional debt due to the acquisition will not impact Reliance Jio’s credit profile given the strong backing of its parent.
Till 31 March 2017, RIL had invested Rs45,000 crore as equity and Rs33,785 crore as non-cumulative optionally convertible preference shares in Reliance Jio. It has also guaranteed Rs19,232 crore of Reliance Jio’s outstanding debt in the period. RIL owns 99.44% in Reliance Jio.
Reliance Jio turned profitable in the quarter ended 31 December, about a year after it started services in September 2016. It reported a profit of Rs504 crore in the fiscal third quarter.
“Jio’s profitability is to a large extent related to its low costs since Jio needs to maintain a single 4G network, while its competitors have to manage 2G and 3G networks along with 4G offerings. Going forward, Jio will also benefit from the recent reduction in call termination charges by Telecom Regulatory Authority of India since a vast majority of calls terminate in rival networks,” said Mahesh Uppal, founder, ComFirst consultancy, a telecom sector advisory firm to Livemint.
