RCom raises $1.93bn of financing from China
Pact strengthens 3G position of India's second cellco and brings deals for Huawei and ZTE
Published: 16 December, 2010
READ MORE: Spectrum | India | Reliance | UMTS
Chinese vendors have been at the heart of India's stringent new rules on security clearance for wireless equipment vendors. However, though Huawei was excluded from supplying state-owned BSNL in some politically sensitive regions earlier in the year, the Chinese firms are fighting back and using their formidable financing capabilities to win Indian business.
Reliance Communications, India's second largest cellco, has signed a financing deal worth $1.93bn with the China Development Bank Corporation (CDBC), according to London's Financial Times. About $1.33bn of that sum will be used to refinance RCom's fees for its 3G spectrum acquired in this year's auctions. The prices of those licenses went far higher than most operators had expected and left some doubts over cellcos' abilities to build out their new networks profitably.
The financing deal also includes up to $600m towards the purchase of equipment from Huawei and ZTE, on top of an existing $750m facility "already substantially utilized" for hardware and services from the two leading Chinese vendors. The proposed debt has a 10-year maturity, and will be provided by CDBC and other Chinese financial institutions. It is subject to certain regulatory approvals.
The FT reports that a Reliance executive said: "The Chinese do a great job when it comes to financing deals...We save about $100m a year compared to what we would [have to pay in interest] in India."
RCom paid INR85.9bn ($1.89bn) for 3G licenses in 13 regions, making it the third biggest investor after Bharti Airtel and Vodafone Essar. A deal to sell off its cell tower arm collapsed, killing its debt reduction plan, at least for now.
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