Ambani Brothers seal a Rs 1200 cr deal ~ elder taking advantage of the weaker younger
This is how I see it !
What is Anil Ambani’s Reliance Communications (RC) getting from Mukesh Ambani’s Reliance Jio Infocom (RJI)other than Rs 1200 as a one time upfront payment to use the former’s 120000 route km fibre optic cable network to role out the latter’s 4G Plans !?
Ah! the Promise that RC can in the future also use the fibre optic network of RJI when build ~ like I can stay in your house now and I promise you can stay in mine if and when I build it !
RC has been under the scanner for it’s role in the 2G Telcom Scam and the Debt Overhang of Rs 37000+ crs is adding to the Valuation woes with the Share Price @ Rs 64 against a FY 12 Book of @ Rs 178
RC has been trying in vain to sell it’s Telecom Tower Business to reduce debt ~ it’s likely that Big Brother may come to the rescue here too ! ~ It’s not getting the price of Rs 30000 crs + it wants for the 50000 Towers Infrastructure ~ It now is ready to rent it at significantly below market rates just to improve cash flows
Clearly Mukesh Ambani’s Reliance Group is a winner in the deal ~ but cannot confirm this for Anil Ambani’s RC as I feel he has simply negotiated weakly from a position of weakness ~ the upfront payment of Rs 1200 crs hardly dents the huge debt ~some time ago it was negotiating a deal for Rs 10000 crs with Etilisat for Connectivity and for Tower Rentals and that too for a Definite Period ! ~ Why could it not negotiate the same with RJI !? ~ those cash flows would have helped reduce debt significantly
Of course ,however, if the Towers are sold for Rs 25000 crs,now that would spark some real life into RC !
Methinks RC should finally be sold off to the Big Brother Group ! ~ now that would be breaking news and RC would race from Rs 64 towards it’s Book Value of Rs 178 ! ~ that’s if the book value is established as genuine ! and Big Brother pays for the 2G and 3G GSM and CDMA Telecom Licenses capitalised by RC~ FY 12 shows a Consolidated Networth of Rs 36721 crs with Equity of Rs 1032 crs of FV Rs 5 and a Total Long Term Debt of Rs 32705 crs ~ This Total Capital Employed of @ Rs 70000 crs is matched by Net Block of Rs 71478 crs of which Tangibles are Rs 43551 crs (incl Plant & Machinery of Rs 41163 crs) and Intangibles are Rs 22901 crs which largely is the Entry Fee for Telecom Licences of Rs 22386 crs (Gross Rs 28047 crs) ~ Capital WIP is Rs 5026 crs