RCOM sees little interest in global asset sale

3 Feb 2010

Despite having offered up its global assets for sale more than a month ago, India’s Reliance Communications (RCOM) has yet to receive much interest for a package that includes the FLAG undersea network, which owns and operates some 65,000km of undersea fibre-optic cable that is utilised for broadband operations across the world. According to Reuters, sources close to the sale process noted that RCOM has already extended its initial late-January deadline for bids, but so far few potential purchasers have stepped forward.

According to one source Singapore Technologies Telemedia, which currently holds stakes in Singapore’s StarHub and undersea cable operator Global Crossing, is considering an offer, but the company has declined to comment on the matter. Additionally, while Japanese giant NTT Corp has been linked to a possible bid, a spokesperson for the company said that this was not the case, and no offer was being considered. It is claimed that potential barriers to a sale, which is being handled by Deutsche Bank, include a lack of financial information being made available to interested parties, while there are also rumoured concerns on the debts that RCOM’s assets carry. Another likely issue is that of value; RCOM is believed to have priced the units for sale at approximately USD3 billion.

While RCOM has denied that it is looking to sell any part of its global unit Reliance Globalcom, Reuters claims to have obtained documents, in addition to the reports from its sources, which show the assets are indeed up for sale. Sources and documents obtained by Reuters show the assets are up for sale. The three main units that are reportedly up for grabs are: FLAG, which, according to TeleGeography’s GlobalComms Database, RCOM acquired in January 2004 for USD211 million; California-based Yipes Holding, which provides high speed data network access to customers in US metros, and also operates a fibre-optic network of more than 22,000km; and Vanco, a British telecom services provider the Indian telco purchased in 2008 for USD77 million. The decision to sell the operations is thought to be due, in part, to declines in revenue at RCOM’s global division; in the three months to end-December 2009 revenues at Reliance GlobalCom fell 12.5% quarter-on-quarter to INR19.82 billion (USD428 million).

India, Reliance Communications (RCOM)