Telecom foray raises RIL’s risks: Moody’s
International rating agency Moody’s on Monday said the risk profile of Reliance Industries has increased following its entry into untested telecom space by acquiring Infotel Broadband Services, but has retained the stable outlook of the Mukesh Ambani-led company.business Updated: Jun 21, 2010 22:51 IST
International rating agency Moody’s on Monday said the risk profile of Reliance Industries has increased following its entry into untested telecom space by acquiring Infotel Broadband Services, but has retained the stable outlook of the Mukesh Ambani-led company.
Despite the increased business risks, the rating agency affirmed Baa2 ratings, three notches down from the highest grade, with a stable outlook for RIL, Moody’s Investor Service said in its weekly outlook.
“Its strong financial balance sheet, with current cash and cash equivalents of more than $6 billion, and $7-8 billion in projected annual cash flow, can easily accommodate the price tag for Infotel and the expected $2-3 billion in additional capital outlays (excluding licence fees) during the initial years,” it said.
Earlier this month, RIL acquired 95 per cent stake in Infotel for Rs 4,800 crore, soon after the HFCL Group promoted Infotel bagged the national licence for broadband wireless access (BWA) radio waves.
The buyout, it said, has “negative credit implications by making a strategic move into the untested but promising wireless broadband spectrum technology in the country”.
However, it added, RIL’s move represents a big bet on the future of the highend communications market in the country. As part of its telecom foray with the Infotel deal, RIL is opting for an unproven long-term evolution 4G technology that has had commercial trials so far only in Norway and Sweden.
Moody’s said ADAG Group’s Reliance Communications and Vodafone, both of which participated in the 3G auctions, pulled out of the BWA auctions, citing high cost.
Moody’s said RIL’s increasing appetite for growth and diversification in geography, sectors, and relatively unproven technologies is also demonstrated in its shale gas deal with US-based Atlas Energy.
First Published: Jun 21, 2010 22:49 IST