Reliance Looking To Sell Off Flag Network: Reports

[Arun 795]

TelecomTV

21 December 2009

The Indian operator Reliance Communications is trying to sell its FLAG subsea fibre-optic network. It seems an odd decision given that the Fibre Link Around the Globe is the jewel in the Reliance crown and utterly central to its worldwide operations. Martyn Warwick reports even though Reliance Communications hasn't officially made any announcement.

Reliance bought Flag in 2003 for US$207 million. A good buy at a good price. Since then, run by Reliance Globalcom, it has made an excellent and very profitable business carrying the telecoms traffic of other operators and service providers as well as selling capacity on the Flag network itself.

Latest figures show that reliance Globalcom - that administers the Flag network - contributes 31 per cent of the company's revenues and provides 26 per cent of operating profit so Reliance must have a pressing reason to sell off the goose that lays the golden eggs.

It has. Reliance is looking to raise some $3 billion in cash to help pay for the expansion of its GSM mobile service, currently lagging at a poor sixth (in terms of market share and subscribers) in India's booming mobile sector. Reliance also has some hefty debts and needs an injection of funds. Flag could well be flogged for a very healthy profit indeed but Reliance could live to regret the decision to sell - the network really is close to the corporate dream scenario of a guaranteed non-stop revenue stream that costs very little to administer.

Reliance is also selling its network interests in the US with both AT&T and Verizon believed to be prospective purchasers.

Sources say Deutsche Bank is handling the sale and that the deadline for bids is the end of January 2010.

Meanwhile, according to new figures from the COAI, uptake of GSM services in the sub-continent continues to go from strength-to-strength. At the end of November this year India had 366.77 million GSM subscribers up up by more than 11 million in just one month. As at October 31, the number was 355.69 million.

In terms of market leadership Bharti Airtel remains at the top with 31.63 per cent and 116 million customers. Vodafone Essar is second with a market share of 24.16 per cent and 85.82 million users. BSNL is third with a market share of 15.05 per cent and 55.18 million susbcribers.

Idea Cellular, at Number Four, is snapping at BSNL's heels with a market share of 15.24 per cent and 55.9 million customers. At position 5 is Aircel with a market share of 8 per cent and 29.35 million customers.

The afore mentioned Reliance Telecom is in sixth place with a market share of just 3.98 per cent and 14.6 million customers. MTNL has 1.23 per cent market share and 4.5 million users. Bottom of the pile is Loop Mobile with a national market share of just 0.71 per cent and 2.59 million customers. However, Loop operates only in Mumbai so comparing it with national players is pointless.

[raju_a 31]

They are looking to reduce their debt which is at Rs 22k Cr and also they require money for 3G spectrum auction which will cost them over Rs5k Cr or even higher as they have to bid for both CDMA & GSM.

[KumaarShah 143]

If true, then its a very sorry state of affairs at RCOM....

[me_saket 73]

but rcom is second largest in term of subscriber share in india including GSM+CDMA.

[SUDYEcaZ 67]

I believe they are planning to sell access network capacity

[Harshal 11]

I think they are in desperate need of funds after the GSM expansion. With the upcoming (yup its still upcoming ) 3G auction they would be all the more in need.

[Himanshu Singh 19]

As I recollect Rcomm wants to sell of Yipes as well.

Rcomm should have done what Tata did for GSM expansion. They should have taken on board some foreign partner. I am sure Rgsm could have been spared the sorry state of affairs it is in at the moment.

[copperco2 24]

i dont think... "sell" in this context is selling off the business but that extra bandwidth that goes un utilised... or selling a part of the network that goes un utilised by RCom to third party

well again one cannot be too sure.

[Himanshu Singh 19]

RCOM finds few takers for FLAG network

REUTERS, 3 February 2010, 01:13am IST

More than a month after putting its biggest global assets up for sale, Reliance Communications (RCOM) has found few callers for a package that includes its prized FLAG undersea cable network. Sources close to the deal said RCOM had already extended an initial deadline of late-January for submissions once, but had still attracted little interest for the deal seeking $3 billion. 

One source said Singapore Technologies Telemedia — which owns stakes in Singapore's StarHub and undersea cable operator Global Crossing — is planning a bid. A spokeswoman for Singapore Technologies Telemedia, a fully-owned unit of state investor Temasek, declined to comment.

The source added that another company said to have expressed interest was NTT, though an NTT spokesman said the company was not considering a bid. Sources said complaints surrounding the deal, being shopped by Deutsche Bank, include a dearth of financial information, concerns about debt and over-abundance of the kinds of assets and services being offered.

"It is no longer something which is in short supply," said Arun Kejriwal of Mumbai-based investment advisory firm KRIS. "Earlier you thought you cannot do without a cable system of your own. But now it's not the case. You can hire whatever you want." In a statement to Reuters, RCOM denied it was trying to sell any assets from its global unit, Reliance Globalcom, but said a total of $3.2 billion worth of investment has gone in the global business through December 2009. Sources and documents obtained by Reuters show the assets are up for sale.

In a statement, the company had said FLAG, the undersea cable network operator, spans 65,000 kilometres and described it as the world's largest private undersea cable system. Three of the main assets in the sale package are FLAG, which RCOM bought for $207 million in 2003; Yipes, a California-based ethernet service provider purchased in $300 million in 2007; and Vanco, a British Telecom's services provider purchased for $77 million in 2008.

All three were struggling when RCOM bought them, with FLAG purchased directly out of bankruptcy and Yipes acquired from a third party that took it over out of bankruptcy. A source said many potential buyers were scratching their heads at RCOM's asking price, said to be around $3 billion, for assets it purchased over the last seven years for less than $600 million combined.

[me_saket 73]

why not finding taker?

might problem is that

whenever they call, and routed through FLAG

announcement is "route is busy plz call after some time" :Contento: :Contento:

so none of called had reached to rcom :rofl_200: