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

Telecom Lead India: 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.

As per the prospectus, the transaction is expected to be
completed by the second week of May.

The telecom company has a total debt of Rs 35,000 crore and
the money being raised by the Anil Ambani Group company from this and listing
and divestment will be used to reduce the debt on Reliance Communication’s

Deutsche Bank, DBS of Singapore, Standard Chartered and
Industrial & Commercial Bank of China are managing the issue. Bankers say
FLAG will be listed under the business trust structure.

The company is a part of Reliance Globalcomm, which is 100
percent owned by Reliance Communications. After the divestment, Reliance
Communications will continue to hold the remaining 25 percent equity stake.

FLAG was acquired in 2001 by Reliance Communications for
$211 million. It controls five undersea cable networks, which cover over 65,000

FLAG’s submarine assets and business will continue to be
controlled by the existing management, ensuring continuity in operations,
according to international banking sources involved with the prospectus.

For the debt-ridden Reliance Communications, the deal is
significant as it comes just a few weeks after its plan to sell the tower
business reached the final lap. Private equity companies Blackstone and Carlyle
Group signed a term sheet to buy up to 95 per cent stake in Reliance Infratel.
The valuation of the business has been pegged at Rs 15,000 crore to Rs 20,000
crore, according to a report in Business Standard.

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.

Last month, 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 fiscal.
The net profit of the second largest telecom operator – based on mobile
user base – fell 61 percent to Rs 186 crore in Q3 2011-12 from Rs 480 crore in
Q3 2010-11.

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