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RCom looks to selling 26% stake in Globalcom

17 Jun 2010 Evaluate

After announcing the demerger of its tower unit, Reliance Infratel, Reliance Communications seems to have set its sights on unlocking value from its undersea optical fibre network and the US network businesses. It is evaluating the option of selling up to 26 per cent stake in its wholly-owned arm, Reliance Globalcom, which could translate into an inflow $500 million, according to sources. The move is part of the overall gameplan to increase the cash on hand and reduce the overall debt so that parent RCom can secure a better market valuation for the 26-per cent put on the block.

Sources say the company will begin the process of inviting bids for the stake in Reliance Globalcom only after it concludes the demerger of Reliance Infratel. With the demerger of Infratel, the company may be able to generate cash inflows of roughly Rs 15,000 crore. This, coupled with the Rs 2,200 crore expected from the stake sale of Globalcom, will significantly strengthen RCom's balance-sheet.

In February 2008, RCom had consolidated the operations of Flag Telecom, Yipes Enterprise Services and other global businesses of RCom into Globalcom. The Flag network, which lies at the heart of its global operations, was acquired in 2003 for $207 million, and now sells capacities on the network as well as the more lucrative telecom services to other carriers and companies around the world. Yipes provides managed Ethernet services for companies in the US.

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