Reliance Communications (RCom), India?s second-largest mobile telephony firm by subscribers, has been struggling to pare its gargantuan debt, but a new target announced by its chairman Anil Ambani has brought some cheer to shareholders.
On Tuesday, Ambani told shareholders at the company’s annual general meeting that RCom targets to reduce its debt to ebitda (earnings before interest, taxes, depreciation, and amortisation) ratio below 3% by 2015 in an effort to allay investor fears, driving RCom’s shares up 5% on the BSE during intra-day trade.
The stock closed at R50.15, up 4.7% from the previous day?s close. As on March 31, 2012, the company’s debt was around R35,000 crore and its net debt was 5.5 times its ebitda.
Ambani also said the company is looking to sell stake in its telecom tower business Reliance Infratel by 2013, and will pursue listing of undersea cable unit Flag Telecom in Singapore when the market conditions are better.
In March, RCom had filed a prospectus in the Singapore Stock Exchange, looking to raise $1 billion through a public offering, but had to shelve the plan in July, citing adverse market conditions. RCom had also planned the sale of Reliance Infratel, but that has dragged on for nearly two years. “Hopefully, in 2013, we will be able to conclude a value-unlocking strategy for Reliance Infratel,” Ambani said on Tuesday.
RCom’s debt accounts for 10% of the cumulative debt of the telecom sector.
Last year, Ambani had said the company is in ?advanced stages of negotiations with a number of consortia that have expressed great interest in this very valuable asset (tower business)”. But the deal never came through.
Talking about the broader telecom market in India, Ambani said the industry would see some consolidation, with 5-6 players operating in the long term. In the medium to long term, consumer prices and tariffs will go up, he said.
In the past one year, the company’s shares have lost 41% of their value.
As of March 31, 2012, RCom had cash and cash equivalents of R 550 crore, down from R4,866 crore as of March 31, 2011.
