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High debt to limit RCom's ability to buyback spectrum in 2021 auction: CLSA

Telecom gear maker Ericsson has filed insolvency case against the Anil Ambani led mobile services firm

Press Trust of India  |  New Delhi 

Anil Ambani, Reliance Capital, Anmol Ambani, Reliance
Reliance Group Chairman Anil Ambani with his son Anmol addresses the Annual General Meeting of Reliance Capital in Mumbai on Tuesday. (Photo: PTI)

Around half of spectrum of debt- ridden will expire in 2021 and high leverage of the company will limit its ability to renew airwaves, leading to a sharp drop in its revenue coverage, CLSA said today.

"High leverage will limit RCom's ability to spectrum in auctions in 2021. This could drive a sharp drop in its revenue coverage and potentially hit revenue," the brokerage firm said in a report.

Reliance Communications, which is reeling under a of about Rs 47,000 crore, has called off talks with Aircel, citing "legal and regulatory" delays.

and had signed binding agreements in September 2016 for the of mobile business and was expecting reduction of about Rs 20,000 crore post completion of the

The company also said unlimited free voice offers and "irrational pricing" by all industry participants have destroyed profitability of traditional and 3G mobile business.

gear maker has filed case against the led mobile services firm.

had failed to pay some of the dues in time and promised lenders that it will be able to service by end of this year. The company, however, has time till December 2018 to service obligation under strategic debt restructuring (SDR) plans.

"At present, RCom's 2G subscribers are on the 900 and 1800 MHz bands and its 4G subscribers are on the 800 MHz band. RCom's revenue coverage of the 800 Mhz band could fall from 100 per cent to 26 per cent post-2021, although its merger with will boost this to 55 per cent," CLSA said.

However, RCom's inability to renew the 1800 MHz spectrum could see its revenue coverage in 900 and 1800 MHz bands fall sharply from the current 92 per cent to 40 per cent, adding further risk, the brokerage firm said.

RCom is in talks with investment firm to sell its mobile towers for Rs 11,000 crore.

"...the valuation was also based on the combined Aircel- RCom entity offering tenancies post-merger to the tower company. RCom-merger now off, the tower deal valuation will be impacted. RCom is working to close the sale of fibre and assets," the report said.

As per revenue share chart shown by CLSA, the share of RCom has declined from 14 per cent in the last quarter of fiscal year 2008 to less than 4 per cent in April-June 2017 period.

Share of RCom today dipped to 17.1 a unit, down by 10.94 per cent compared to previous close, on today.

First Published: Tue, October 03 2017. 21:17 IST