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Rcom shares surge over 5% after 7-month extension to service debt

The company will work on two deals, which will reduce its debt by 60% of the total $7 billion

Reuters  |  Mumbai 

anil, reliance, ambani
Anil Ambani

in Communications rose as much as 4.6 per cent on Monday after the debt-laden mobile carrier said it won a seven-month reprieve on its loans from lenders.

The company's chairman, billionaire Anil Ambani, said on Friday it will receive a "standstill" on servicing obligations until December as it works on two deals that it expects will reduce its by 250 billion rupees ($3.9 billion), or 60 per cent of its $7 billion

RCom, as the company is widely known, said it will complete the merger of its wireless division with rival Aircel and sell a stake in its mobile masts business by September, and analysts said they would be closely tracking progress.

Failure to clinch those deals by the end of the year could see lenders force through a restructuring or convert their to equity under India's strategic restructuring (SDR) rules that can be applied to companies that default on their loans.

Gaurang Shah, head investment strategist at Geojit Financial Services, said he was not convinced the reprieve would mark a turnaround in RCom's fortunes.

"We're yet to see whether they'll be able to sell the tower business and what they plan to do with Aircel," he said. "Even if they're able to do these two, there is on their balance sheet.

"There wasn't any clarity on how they're going to revive their business," he added. "Telecom is one of the most difficult businesses in India."

in the company were trading up 1.2 per cent at 20.90 rupees in the morning. Bonds due 2020 were a quarter point higher at 69/72 cents on the dollar.

The share recovery comes after slumped 19.8 per cent last week to a series of record lows, registering its worst weekly performance since October 2009 after posting a second consecutive loss and experiencing a slew of credit rating downgrades.

RCom, India's seventh-ranked mobile carrier, still faces a challenging outlook after a price war triggered by the arrival last year of Jio Infocomm Ltd, run by Anil's elder brother Mukesh Ambani, ramped up competition and eroded profits in the sector.