ICRA downgrades Reliance Communications rating due to Rs 37,000 crore debt

Telecom Lead India: Rating agency ICRA has downgraded
Reliance Communications’ long term rating from stable to negative.


ICRA is concerned about Rs 37,000 crore debt of Reliance
Communications at the end of last year and the challenging operating


The impact of the high-debt levels has been further
compounded because of the steep depreciation of the rupee. Nearly three-fourths
of RCom’s debt is foreign currency denominated.


While the rate per minute has stabilized at around 44
paise in the last few quarters, the minutes of usage for the company has
declined from 262 minutes per subscriber per month in 2010-11, to 230.


Correspondingly, the ARPU has declined from Rs 116 in
2010-11 to Rs 102 in the next year. Offtake of the 3G service is unlikely to
materialize in the near term.


The regulatory environment is uncertain and there are
concerns over issues such as one time payment for excess spectrum, spectrum
pricing and licence renewal fee.


Reliance Communications is in the process of raising
funds through the listing of undersea telecommunications infrastructure network
business at the Singapore Stock Exchange.


Though the funds so raised would help the company
deleverage its balance sheet, the debt level would continue to be high for the
current rating category, according to ICRA.


The cancellation of 122 telecom licences by the Supreme
Court has also impacted RCom’s plans to sell stake in its subsidiary Reliance


FLAG Telecom files prospectus in Singapore stock exchange to
divest 75% stake


Flag Telecom, a part of Reliance Communications, has
filed a prospectus in the Singapore Stock Exchange to divest 75 percent stake
in the submarine cables business for $1.25-1.5 billion.


If the tower deal also goes through as planned, Reliance
Communications will be able to wipe out over Rs 27,500 crore of debt.


Reliance Communications raises $1.18 billion


Recently, the telecom operator raised $1.18 billion at an
interest rate of 5 percent from Chinese banks to repay lenders of its overseas
convertible bond that the company had issued in 2007.


Reliance Communications   posted 1 percent increase in Q3 2011-12 income to
Rs 5,052 crore against Rs 5,004 crore in the same quarter previous


[email protected]