RCom Bows out of wireless sector in India

India’s telecom group Reliance  Communications said yesterday it had apparently reached an arrangement with their lenders China Development Bank, its largest single creditor,  on a “ full resolution” of its nearly $7bn debt, sending its shares up by 30 per cent.

The details of the deal are as follows, RCom, which has been hit by price competition in India’s telecoms industry, exit the retail business and remodel itself as a smaller business-to-business enterprise. By restructuring the company will be forced to sell most of its telecom assets, including fiber optic cable, Towers and spectrum and a 125-acre land near Mumbai, and thereby raise $3.8bn which can be used to pay down bank loans. This restructuring deal follows soon after RCom was hit by an insolvency petition from China Development Bank. The new insolvency law, which came into force last year, was stop failing companies surviving for years with their founders in charge and their creditors forced to take steep losses on loans.

Ironically, Anil Ambani’s RCom owner’s trouble started as a result of direct competition in the wireless telecom sector rocked by last year’s arrival of his brother Mukesh Ambani’s Reliance Jio.

RCom had a market share of more than 17 per cent and the second position in the telecom segment in India.