Reliance Communications Chairman Anil Ambani on Tuesday said he expected value unlocking in its telecom tower business to be completed next year. “After January 2013, spectrum auctions would be over. By then, there would be a fair amount of visibility on the number of players and their infrastructure requirements,” Ambani said at the company’s annual general meeting.
He said he expected consolidation in the telecom industry, making it a five- to six-player market. He also predicted a rise in telecom rates in the long term. This, however, would not take away from the freedom of consumers. “For the billion Indians, there will be choices, choices and choices. While tariffs will go up, competition will be there,” he said.
Ambani also addressed shareholders’ queries on the company’s mounting debt and the drop in its market capitalisation. “The value of the spectrum we hold is twice that of the current marketcap. Forget the infrastructure, electronics, revenues, profits and cash flows,” said Ambani. The company’s total market capitalisation is about Rs 10,351 crore. On Tuesday, its stock rose 4.7 per cent to close at Rs 50 a share on the BSE.
At Rs 35,000 crore, Reliance Communications’ debt has been a major concern for analysts and investors. On this, Ambani said the entire telecom sector had about Rs 3,00,000 crore of debt. “Of this, we have just 10 per cent. And, of this, about Rs 10,000 crore is on account of 3G, for which we would take 18 more years to monetise the spectrum,” he said. The company expects to reduce its debt significantly by 2013-14.
It also expects data and broadband to drive growth in the future. “We have put in a lot of investment ahead of time, and now, we are in the midst of a data tsunami. For data, we expect a growth curve similar, or even shorter, to that of the voice business,” said Gurdeep Singh, chief executive of Reliance Communications’ wireless business.
Ambani said the company was committed to unlocking value in its businesses and pursuing several strategies to reduce debt. The company had set targets like improving competitiveness and capacity utilisation to generate free cash flow. Apart from raising funds from its telecom tower business, the company aims to list its undersea cable business, Flag Telecom, in Singapore. Recent plans to list the company did not materialise, owing to adverse market conditions.
On Tuesday, Ambani also assured Reliance Power shareholders their long-standing demand for dividend would be considered. “We will consider the maiden dividend of Reliance Power in the next financial year,” he said, adding the plan for a qualified institutional placement was a step towards meeting market regulations. The group has sought the approval of shareholders to a resolution to raise funds through stake sale in all its companies, including Reliance Power and Reliance Infrastructure.
Ambani said the power sector was seeing various challenges.
like scarcity of fuel and land, as well as ill-health of distribution companies. He added rates in the sector would rise. “Tariffs would go up, reflecting the reality of the prices of coal and gas,” he said.