Reliance Communications Said to Approach Citic on GCX Sale

  • Indian wireless carrier explores sale of undersea cable unit
  • Billionaire Ambani seeks to divest assets to pay down debt

Billionaire Anil Ambani’s Reliance Communications Ltd. has approached Citic Telecom International Holdings Ltd. as it makes a fresh attempt to attract a buyer for its undersea cable unit, people with knowledge of the matter said.

Reliance Communications is reaching out to potential acquirers for the Global Cloud Xchange business, known as GCX, as the Indian carrier explores further asset divestments to pay down debt, according to the people. Hong Kong-based Citic Telecom, which has a market value of about $1.1 billion, hasn’t decided whether to proceed with an offer, the people said, asking not to be identified because the information is private.

GCX’s 7 percent bond due in 2019 jumped 1.9 cents on the dollar, set for the biggest daily increase since May 31, according to data compiled by Bloomberg. A representative for Citic Telecom declined to comment, while a representative for Reliance Communications didn’t immediately respond to emailed questions.

Any separation from Reliance Communications would likely be positive for GCX bonds, according to MUFG Securities Asia Ltd. The bonds remain “fairly well protected” in the overall Reliance Communications capital structure and offer “some speculative value,” Rick Mattila, the firm’s international head of market strategy, wrote in a note to clients Tuesday.

Citic Telecom had been in negotiations to buy Reliance Communications’s undersea cable assets in 2014 for more than $500 million, people with knowledge of the matter said earlier. Talks floundered after a management change at Citic Telecom, partly because its new chief executive officer wasn’t keen to pursue a deal early in his tenure at the Chinese government-backed firm, one of the people said in early 2015.

Debt Moratorium

Reliance Communications stock has lost more than half its value in the past year amid mounting concerns about the carrier’s ability to pay off debt. It has struggled to retain customers in an increasingly competitive Indian wireless market after Reliance Jio Infocomm Ltd. -- led by Anil’s older brother, Mukesh -- started last year with offers of free services.

“Selling off assets including GCX is the only option before Reliance Communications to pare its unsustainable debt,” Rethish Varma, a Bengaluru-based research lead at MarketSmith India, said by phone Tuesday. “Lenders are pushing the company to close deals on these assets before a moratorium on debt payment runs out.”

A transaction would add to the $91.4 billion in acquisitions involving Indian companies during the last 12 months, data compiled by Bloomberg show. Deliberations are at an early stage, and the structure of any potential deal hasn’t been finalized, according to the people. Reliance Communications could decide to keep the GCX business, and it may also attract interest from other suitors, one person said. 

Reliance Communications said June 2 its lenders agreed to a seven-month moratorium on debt payments after its credit rating was slashed. Creditors are giving the company until December to sell its towers to Brookfield Infrastructure Group and merge its wireless business with Aircel Ltd.

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