Fitch assigns stable outlook to RCom

Fitch Ratings today affirmed rating on Reliance Communications with a stable outlook.
"Fitch Ratings has affirmed India-based telecoms service provider Rcom long-term foreign and local-currency issuer default ratings (IDR) of 'BB-'. The outlook is stable," Fitch said in a statement.
Fitch has simultaneously affirmed the 'BB-' rating on Rcom's USD 300 million 6.5 per cent senior secured notes due 2020.
It said the affirmation factors in Rcom's commitment to deleverage in a timely manner by using the proceeds from the sale of its tower business by its subsidiary, Reliance Infratel.
The management has committed to repay a part of its USD 6.1 billion debt and to achieve a target debt/EBITDA of below 3.0x by end-March 2017.

"We would likely downgrade the rating if the company is unable to demonstrate in a timely manner that it has the ability to pay down debt such that FFO-adjusted net leverage will fall to below 4.5x," it added.

Rcom has a non-binding arrangement to sell Infratel's tower business to Tillman Global Holdings, LLC and TPG Asia.
Rcom is also considering deleveraging via a sale of its non-core assets, including its under-sea cable subsidiary Global Cloud Xchange, real estate and its pay-TV business. However, progress on these asset sales has been slow to date, Fitch said.
Rcom's IDR is constrained by its weak market position as the fourth-largest telco in India with a revenue market share of around 8 per cent and a subscriber base of mostly low-revenue customers, the rating agency said.

"Rcom could face further challenges due to higher competition in the data market as Reliance Jio enters the market in 2H16. However, Rcom's ownership of a pan-India spectrum in 800MHz/850MHz and its ability to offer faster 4G data services could help it fend off the competition, to some extent," Fitch added.
Fitch said it believes that Rcom's acquisition of Sistema Shyam Teleservices Ltd (SSTL) in an all-stock deal is credit neutral for Rcom.
"Rcom will benefit from additional 9 million subscribers and Rs 15 billion revenue and also will be able to extend the life of its 800MHz spectrum in eight Indian circles," it added.