Through his deals with his younger sibling, Mukesh Ambani is getting telecom infrastructure for RJio's 4G services at probably a fifth the rate of building his own network. Anil Ambani’s RCom on the other hand would be able to generate additional revenues from its infrastructure that can reduce debt of about Rs40,000 crore from its books
Mukesh Ambani-led Reliance Jio Infocomm (RJio) has signed one more deal with younger sibling Anil Ambani's debt-ridden Reliance Communications (RCom) for sharing telecom towers across the country. The aggregate value of the deal is over Rs12,000 crore and would help RCom to cut down its huge debt substantially.
As per the agreement, RJio would utilise up to 45,000 ground and rooftop based towers across RCom's nationwide network for accelerated rollout of its state-of-the-art 4G wireless broadband services, the company said in a release. These telecom towers carry RCom's CDMA and GSM network. While 75% of the towers are ground-based, the rest are rooftop based.
Today's agreement follows the inter-city optic fibre sharing agreement already signed in April 2013 as part of a comprehensive framework of business co-operation between RJio and RCom. This would result in RCom earning Rs1,200 crore over a period.
Both the deals, for sharing optical fibre network and the other for sharing telecom towers look like pure business deals. Well, at least on the paper. But more about it later.
The signing of agreement between RJio and RCom for telecom towers and optical fibre network (earlier in April) is beneficial for both the companies. Especially, RJio’s parent Reliance Industries (RIL) is a cash rich conglomerate (as of March 2013, it had cash balance of around Rs84,100 crore), while RCom is striving hard to reduce the debt level from its books. RCom had maintained its stance of selling stake in its tower assets, which might help in deleveraging the balance sheet and reducing debt. According to reports, RCom has a debt of about Rs40,000 crore as of March 2013.
Even during the quarter to end-March, RCom would have reported a loss, but for one time write back of provisions, which led to Rs550 crore extra other incomes. Its gross debt in rupee terms has increased Rs40,145 crore in FY13 from Rs36,917 crore in FY12.
In March 2013, RCom made yet another attempt to reduce its debt. In a regulatory filing, RCom, had said it was in talks with Bahrain Telecommunications Co (Batelco) to sell stake in Reliance Globalcom, its enterprise business unit. However, nothing has been finalised as yet.
According to a research report from ICICIDirect, RCom may strike a deal with Samena Capital for stake sale in Reliance Globalcomm. “For any meaningful reduction in debt, the company would have to sell a majority stake in its subsidiary. Though this would help prune down debt by a substantial amount, RCom’s EBITDA would be wiped off by a considerable amount as Reliance Globalcomm contributed 33.4% and 31.8% to consolidated topline and EBITDA, respectively,” the brokerage added.
Earlier on 9 March 2011, the Anil Ambani group company signed Rs8,700 crore loan facility with China Development Bank (CDB) for refinancing of 3G spectrum fees. The facility included Rs6,000 crore ($1.33 billion) for refinancing 3G spectrum fee payments by RCom and Rs2,700 crore ($600 million) for equipment imports from Chinese vendors.
In 2012, RCom had also withdrawn its $1-billion initial public offering (IPO) plans for its submarine cable unit Flag Telecom, citing unfavourable market conditions.
Coming back to the renewed love between the two Ambani companies, this is logical for both RIL and RCom to execute infrastructure sharing deals, provided the pricing and utilization benefits both.
While RJio would benefit from spending money and time for building infrastructure for its 4G network, RCom would be able to generate additional revenues from its existing telecom infrastructure.
RJio would be able to save cost of building optical fiber network (the cost to lay only fiber is from Rs4 lakh to Rs5.5 lakh per km, excluding the cost for rights of way that may go up to Rs10 crore in metros) and telecom towers (estimated to be between Rs1.3 crore to Rs3 crore each). Moreover, backhaul fibre would be needed to link the towers to the network, which could again be costly and time-consuming.
Telecom has always been a sector close to the heart of the RIL’s chairman and managing director, Mukesh Ambani. However, he had to give up Reliance Infocomm (which later became RCom) to Anil Ambani in 2005 when the Reliance empire was split.
Later in 2010, Mukesh Ambani-led RIL re-entered the telecom arena with a bang, announcing the acquisition of Infotel Broadband Services Pvt Ltd, which had emerged as the sole winner of pan-India broadband spectrum, for Rs4,800 crore.
Soon after signing the deal for sharing optical fibre network, Mukesh Ambani-led RIL parked more than Rs800 crore in various mutual fund schemes of younger sibling Anil-led Reliance Group. RIL’s investment in Reliance MF schemes, which has been made over a period of eight months, came as a clear departure of the oil-to-retail conglomerate’s earlier stance of parking surplus funds into almost all the mutual funds, expect on those run by the Anil Ambani-led group.
At the end FY2012, RIL had invested over Rs8,700 crore in various mutual fund schemes, including fixed maturity plans (FMPs), but they did not include any scheme of Reliance MF. In contrast, RIL has always figured prominently in the stock portfolios of various schemes of Reliance Mutual Fund.
At least 13 schemes of Reliance Mutual Fund had RIL as one of the biggest stock in their respective portfolios as on 31 March 2012 and together these funds held RIL shares worth well above Rs500 crore.
While the deals are being signed, big plans are being announced, there yet is no date being announced for the impending launch of RJio’s 4G services for reasons best known to Mukesh Ambani.
The capital market regulator has spent crores of rupees, twice, over sophisticated real time market surveillance systems to track stock price manipulation. Yet, it says it has no statistics on the surveillance!
In a shocking disclosure, the Securities Exchange Board of India (SEBI) says that it does not have information relating to its market surveillance system! This was in response to an RTI filed by Moneylife. Moneylife had filed an RTI on 9 April 2013, requesting information on SEBI’s surveillance statistics and had asked SEBI how many suspicious cases its sophisticated Integrated Market Surveillance System (IMSS) and Data Warehousing Business Intelligence System (DWBIS) had detected till 31 March 2013. Our questions were simple:
Well, it seems the regulator did not have such information with it! SEBI vide its reply no CPIO/AKS/AJ/325-2013/10853, stated, “It is informed that the information sought by you is not available with the concerned department of SEBI.” How is this even possible? If the surveillance department does not have such information, then who has it? Who is really in charge of monitoring the data captured by the surveillance department?
SEBI has spent over a whopping Rs50 crore in the so called “state-of-the-art” surveillance systems: IMSS and the more modern DWBIS. Earlier, SEBI had touted that the DWBIS project will “exploit the power of modern technology in terms of computation and speed of data analysis” and “host pattern recognition algorithms” to crack insider trading. Despite all this hype and talk and the enormous amount of money spent, stock manipulation still continues, right under SEBI’s nose.
Even now, Moneylife routinely comes across companies, mostly with poor fundamentals and past track record of transgressions, whose share prices brazenly manipulated, in no time, putting minority shareholders at a disadvantage. For instance, Moneylife wrote that Nucent Estates (Unquoted section of Moneylife issue dated 16 May 2013) went up a whopping 742% from just Rs1.28 to Rs10.78 in just one year. The company had earlier failed to comply with Bombay Stock Exchange (BSE) corporate governance norms. It even changed its name, a common tactic adopted by companies to disguise their past transgressions. Similarly, Kelvin Fincap (Moneylife issue dated 2 May 2013) rose 549% within a year after BSE had revoked its suspension! There are numerous cases which Moneylife has written about. Do check out the Unquoted section of the magazine and website (http://www.moneylife.in/?cx=012932029967637413115%3Aroup7yt0ras&cof=FORID%3A9&ie=UTF-8&q=Unquoted&imageField.x=-1150&imageField.y=-221). You will be alarmed and surprised at the ease of how company share prices can be manipulated. Moneylife even did a cover story on this (which can be accessed here: Stock Manipulation). Even stock exchanges such as National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) do little. So much for SEBI spending huge amount of tax payers’ money on this surveillance system!
Moneylife had found out that 48 staff members are posted in the Integrated Surveillance Department (ISD) of SEBI, which houses the IMSS and DWBIS system, as of 31 March 2013. The IMSS contract value was found out to be Rs20.55 crore, out of which Rs6.52 crore went towards “capital expenditure” between 2007 and 2010. HCL Technologies was the vendor.
Then SEBI adopted another system known as DWBIS, which came into existence from 2010 onwards, and the contract value was found to be Rs34.38 crore and Tata Consultancy Service (TCS) is the new vendor. Out of this amount, over Rs11 crore has gone towards “capital expenditure” in the last two years alone. This is collectively over Rs50 crore of taxpayers’ money.
This is a lot of taxpayers’ money and nobody knows if SEBI is truly looking at cases triggered by the systems, if at all, let alone punishing offenders and compensating minority shareholders. Nobody knows how effective SEBI’s surveillance system is either. It is even more shocking that the surveillance department of SEBI do not have the information with them.
Moneylife has filed a first appeal before the First Appellate Authority at SEBI.
In a notification, the RBI said while granting advance against the security of specially minted gold coins sold by banks, co-operative banks “should ensure that the weight of the coin(s) does not exceed 50 grams per customer”
The Reserve Bank of India (RBI) has extended the restriction on advance against gold on co-operative banks as well, a move aimed at curbing demand for gold.
In a notification, the RBI said while granting advance against the security of specially minted gold coins sold by banks, state/central co-operative banks “should ensure that the weight of the coin(s) does not exceed 50 grams per customer”.
Also the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) should be within the board approved limit, it added.
Earlier, similar restrictions were imposed on commercial banks.
The RBI’s latest move comes in the backdrop of government raising import duty on gold to 8% from 6%.
The central bank has also advised banks not to sell gold coins, finance minister P Chidambaram said yesterday.
RBI has also imposed restrictions on gold imports by banks.
Surge in gold imports has become a cause of concern for both the government as well as the RBI as it putting pressure on the current account deficit, which is likely to be around 5 per cent of the GDP in 2012-13.