RComm selling FLAG, US units? No, says company
Reliance Communications is looking to sell its undersea fiber optic network and US network businesses, hoping to raise around $3 billion in cash, three sources with direct knowledge of the matter said.business Updated: Dec 14, 2009 21:25 IST
Reliance Communications is looking to sell its undersea fiber optic network and US network businesses, hoping to raise around $3 billion in cash, three sources with direct knowledge of the matter said.
Reliance acquired the FLAG network, which lies at the heart of its global operations, in 2003 for $207 million, and now sells both capacity on the network as well as more lucrative telecoms services to other carriers and companies around the world.
The sources, who did not want to be identified because they were not authorised to speak publicly about the deal, said that Reliance had hired Deutsche Bank to advise on the sale and that bids were due in late January. Deutsche Bank declined to comment.
“It is an extreme option ... selling its overseas operations,” said Yogesh Kirve of Anand Rathi Securities.
Analysts said the large debt of the company and its ongoing capital expenditure for GSM expansion in India had required it to scout around for various options to raise funds.
“They have very few choices to raise funds,” said Hitesh Kuvelkar, research head at brokerage First Global.
“Their capex requirement for expanding their GSM network is huge and they have to raise that from somewhere,” he said.
A Reliance spokesman, who did not want to be named, said: “We vehemently deny these speculations and rumours.”
The FLAG business, which stands for Fiber-optic Loop Around the Globe, is run by Reliance Globalcom, the company’s overseas arm. Reliance is also selling Yipes, a California-based ethernet service provider it bought in 2007.
Yipes, which was renamed Reliance Enterprise Solutions, provides managed services for companies in the United States.