R-Comm to spend $2.5b for expansion

Reliance Communications, India’s second-largest wireless company, will spend about $2.5 billion over the next one year to expand its coverage across the country, chairman Anil Ambani said on Thursday.

The company aims to expand coverage to another 15,000-20,000 new towns. Every single cluster, with a population of over 50,000, will be served once this expansion is completed, Mr Ambani added. The expansion will be funded through a mix of internal accruals and debt. Reliance has a net worth of over Rs 20,000 crore and a low debt-equity ratio. Plus, it generates an annual cash flow of over $1.5 billion.

The latest move comes at a time when Reliance is preparing to place a final bid for Hutchison-Essar. Hutchison Whampoa is selling its 67% stake in the company and has already allowed prospective bidders to do a due diligence. Reliance is on the verge of completing its due diligence. A final bid will be called soon after the shareholders’ meet of Hutchison Telecom International. Mr Ambani said that the picture will become clearer over the next few weeks.

Reliance has an overall subscriber base of over 30 million. Mr Ambani told a conference call that the rollout will be completed within the next 12 months. RCL’s subsidiary, FLAG Telecom, is also investing $1.5 billion in a new project.

The company is expanding capacity in all its major segments. Recently, it completed the expansion in its GSM business where capacity was raised to 10 million lines. The GSM business, which services seven circles in east and north-east and Himachal Pradesh, now has a subscriber base of 4 million.

RCL on Wednesday posted a 198% increase in third quarter net profit to Rs 924 crore, while operating profit expanded 76% to Rs 1,527 crore. The EBITDA margin rose to 41% from 29%, while revenue rose 26% to Rs 3,755 crore.