RCom "FLAG sale" asking price too high?
03-02-2010
Another grouse: RCom "parsimonious" with data for asset assessment
Reliance Communication is reportedly facing a buyer shortage in its bid to sell some global bandwidth assets (See our earlier writeup: No takers yet in Reliance's "FLAG sale"). Reports are that "potential buyers were scratching their heads at Reliance Comm's asking price, said to be around $3 billion, for assets it collectively purchased over the last seven years for less than $600 million combined...How could they possibly believe the thing is worth five times what it was four years earlier?"
That may be a somewhat unfair assertion since Reliance has since invested in its global assets. In a statement to Reuters, which denied the bid to sell any assets from its global unit (Reliance Globalcom), Reliance pointed out that about $3.26 billion worth of investment has gone in the global business through December 2009. But that, of course, is the full global business, not the assets reportedly for sale.
Three of the main assets in the sale package are FLAG, which Reliance Comm bought for $207 million in 2003; Yipes, a California-based ethernet service provider purchased in $300 million in 2007; and Vanco, a British telecoms services provider purchased for $77 million in 2008. All three were struggling when Reliance Comm bought them, with FLAG purchased directly out of bankruptcy and Yipes acquired from a third party that took it over out of bankruptcy.
Hardly reassuring is the fact that Reliance is looking to unload the business as revenue at its global division fell 12.5 percent in October-December from the previous quarter to Rs.19.82 billion ($428 million). Revenue at the unit,though, rose 20 percent sequentially in the previous quarter.
Sources close to the deal said Reliance Comm 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 contemplating a bid.
Some potential buyers have complained that Reliance Comm has been particularly parsimonious with the financial information it is willing to give out, and is being overly optimistic about its financial projections.
"They're making you base your bids on supplying you with six or seven numbers" said one of the sources. "They give you almost nothing to go on. No cash numbers. It's very limited information."
Business Standard
Reliance Communication is reportedly facing a buyer shortage in its bid to sell some global bandwidth assets (See our earlier writeup: No takers yet in Reliance's "FLAG sale"). Reports are that "potential buyers were scratching their heads at Reliance Comm's asking price, said to be around $3 billion, for assets it collectively purchased over the last seven years for less than $600 million combined...How could they possibly believe the thing is worth five times what it was four years earlier?"
That may be a somewhat unfair assertion since Reliance has since invested in its global assets. In a statement to Reuters, which denied the bid to sell any assets from its global unit (Reliance Globalcom), Reliance pointed out that about $3.26 billion worth of investment has gone in the global business through December 2009. But that, of course, is the full global business, not the assets reportedly for sale.
Three of the main assets in the sale package are FLAG, which Reliance Comm bought for $207 million in 2003; Yipes, a California-based ethernet service provider purchased in $300 million in 2007; and Vanco, a British telecoms services provider purchased for $77 million in 2008. All three were struggling when Reliance Comm bought them, with FLAG purchased directly out of bankruptcy and Yipes acquired from a third party that took it over out of bankruptcy.
Hardly reassuring is the fact that Reliance is looking to unload the business as revenue at its global division fell 12.5 percent in October-December from the previous quarter to Rs.19.82 billion ($428 million). Revenue at the unit,though, rose 20 percent sequentially in the previous quarter.
Sources close to the deal said Reliance Comm 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 contemplating a bid.
Some potential buyers have complained that Reliance Comm has been particularly parsimonious with the financial information it is willing to give out, and is being overly optimistic about its financial projections.
"They're making you base your bids on supplying you with six or seven numbers" said one of the sources. "They give you almost nothing to go on. No cash numbers. It's very limited information."
Business Standard
