Acquisition of RCom telecom assets has no impact on RIL's ratings: Moody's

RIL considers these assets strategic in nature and expect to use them for large-scale roll-out of its wireless and fiber to home and enterprise services.

By Priyanka
|

According to a new report by Moody's, acquisition of RCom's telecom assets has no impact on RIL's Baa2 ratings.

Acquisition of RCom telecom assets has no impact on RIL's ratings

 

Even if we assume that the entire RCOM's debt reduction of Rs 250 billion is derived from the sale of assets to RIL, it will only account for 0.4x of RIL's reported EBITDA for the last twelve months ended September 2017 and 11.6 percent of RIL's consolidated borrowings as of September 2017. RIL also had cash and cash equivalents of $770 billion on the same day, which can be used to fund the acquisition," says Vikas Halan, a Moody's Vice President, and Senior Credit Officer.

As part of the transaction, Jio will acquire 122.4 MHz of 4G spectrum, 43,000 towers, 178,000 route kilometer of pan India optical fiber network and 248 media convergence nodes. "RIL considers these assets strategic in nature and expects to use them for large-scale roll-out of its wireless and fiber to home and enterprise services," Moody's said.

The acquisition also removes the overhang of RIL's ability to access the telecom infrastructure assets of RCOM following the latter's debt restructuring. It also ensures that RCOM's 4G spectrum does not fall into hands of RIL's competitors.

As such, despite a possible increase in RIL's consolidated leverage the acquisition can be accommodated within RIL's rating. However, the acquisition could reduce the cushion under RIL's rating for further increase in its borrowings, especially if the company does not reduce its planned capital expenditure for its telecom business.

The acquisition is subject to receipt of requisite approvals from Governmental and regulatory authorities, consents from all lenders of RCOM, release of all encumbrances on the assets and other conditions precedent.

The acquisition is the latest installment in the ongoing consolidation in Indian telecom sector, which is evidently moving from having over 10 active telecom service providers to just about three or four players having the entire market.

 

Reliance Industries Limited (RIL) is a leading Indian energy company, with large refining and extensive petrochemical operations and a small portfolio of upstream oil & gas assets. It also has a growing digital services business, along with some exposure to organized retail.

Most Read Articles
Best Mobiles in India

Read More About: rcom reliance jio telecom news

Best Phones

Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Yes No
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Gizbot sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Gizbot website. However, you can change your cookie settings at any time. Learn more
X