Reliance hopes for $1.5 bln from cable IPO
19-03-2012
Banking on data deluge to boost prospects for it bandwidth properties
The undersea cable unit of Reliance Communications has applied to list in Singapore, two sources with direct knowledge of the matter said, potentially raising $1-1.5 billion to help its parent pare a heavy debt burden.
The unit will list as a business trust and has been keen to raise up to $1.5 billion in what is set to be Singapore's biggest IPO of the year but sources involved in the process have said $1 billion is a more realistic target.
People familiar with the situation said in January that Reliance Communications was looking to hive off its businesses handling undersea cable networks connecting North Asia with the U.S. and Europe, and list them as a business trust in Singapore. The company had planned to sell about 75% in the business trust to investors. The proceeds would be used to pare the company's around $7 billion in debt.
With global stock markets now on the mend, markets like Singapore are once again in favor for IPO candidates put off late last year when the sovereign-debt crisis in Europe and worries about the U.S. economy put off investors. Singapore's stock market is up 13% this year.
Singapore is also the favored venue in Asia for companies seeking to list through a business trust structure
A successful offering would be a major relief for Reliance Communications which has seen its fair share of failed deals. It is struggling with around $7 billion in debt and has posted 10 straight quarters of profit decline amid fierce competition.
The IPO is likely to be launched in the second quarter of 2012, said the sources. Sources have said previously that Reliance Communications plans to sell 75 percent of the wholly owned unit in the offer.
By listing in Singapore, the unit can take advantage of some of the most attractive rules for listing a business trust. Business trusts contain assets that pay regular dividends, most of which are distributed to shareholders.
Successful deals have been few for Reliance Communications. A hoped-for IPO of its telecoms tower unit failed to take off and a planned sale of the business has dragged on for nearly two years, forcing the mobile operator to tap Chinese loans again to repay about $1.2 billion in overseas convertible bonds that were due for redemption this month.
The telecoms tower unit could be bought by Blackstone and Carlyle, with the U.S. buyout giants jointly negotiating with Reliance Communications about a potential deal worth more than $3 billion. These talks have dragged on for several months however.
And it not the first time that Reliance Communications has sought a deal for its undersea cable business. In December 2009, it had hoped to raise around $3 billion by selling the unit but found no takers.
Reliance Communications acquired the FLAG undersea cable network for $207 million in 2003 and the business is now part of its Reliance Globalcom unit, which owns the world's largest private undersea cable system spanning 65,000 kilometres, according to its website.
Reuters
The undersea cable unit of Reliance Communications has applied to list in Singapore, two sources with direct knowledge of the matter said, potentially raising $1-1.5 billion to help its parent pare a heavy debt burden.
The unit will list as a business trust and has been keen to raise up to $1.5 billion in what is set to be Singapore's biggest IPO of the year but sources involved in the process have said $1 billion is a more realistic target.
People familiar with the situation said in January that Reliance Communications was looking to hive off its businesses handling undersea cable networks connecting North Asia with the U.S. and Europe, and list them as a business trust in Singapore. The company had planned to sell about 75% in the business trust to investors. The proceeds would be used to pare the company's around $7 billion in debt.
With global stock markets now on the mend, markets like Singapore are once again in favor for IPO candidates put off late last year when the sovereign-debt crisis in Europe and worries about the U.S. economy put off investors. Singapore's stock market is up 13% this year.
Singapore is also the favored venue in Asia for companies seeking to list through a business trust structure
A successful offering would be a major relief for Reliance Communications which has seen its fair share of failed deals. It is struggling with around $7 billion in debt and has posted 10 straight quarters of profit decline amid fierce competition.
The IPO is likely to be launched in the second quarter of 2012, said the sources. Sources have said previously that Reliance Communications plans to sell 75 percent of the wholly owned unit in the offer.
By listing in Singapore, the unit can take advantage of some of the most attractive rules for listing a business trust. Business trusts contain assets that pay regular dividends, most of which are distributed to shareholders.
Successful deals have been few for Reliance Communications. A hoped-for IPO of its telecoms tower unit failed to take off and a planned sale of the business has dragged on for nearly two years, forcing the mobile operator to tap Chinese loans again to repay about $1.2 billion in overseas convertible bonds that were due for redemption this month.
The telecoms tower unit could be bought by Blackstone and Carlyle, with the U.S. buyout giants jointly negotiating with Reliance Communications about a potential deal worth more than $3 billion. These talks have dragged on for several months however.
And it not the first time that Reliance Communications has sought a deal for its undersea cable business. In December 2009, it had hoped to raise around $3 billion by selling the unit but found no takers.
Reliance Communications acquired the FLAG undersea cable network for $207 million in 2003 and the business is now part of its Reliance Globalcom unit, which owns the world's largest private undersea cable system spanning 65,000 kilometres, according to its website.
Reuters
Custom reports on Indian telecom
Indiatel provides complete anlaysis of India's telecom, telecom equipment and allied businesses.
We can do customized reports for you on topics of your choice. Our more standard sector reports include:
India's mobile telecom services business
India's international bandwidth business
India's GSM and CDMA handset business
India's international long-distance telecom business
India's cable TV equipment market and competition
For more India titles click here...