Moody’s places Reliance Communications’ Ba3 ratings under review for downgrade

COIMBATORE (TIP): Moody’s Investors Service has placed under review for downgrade Reliance Communications’ (RCOM) Ba3 corporate family rating and senior secured rating following the announcement of its plan to merge its wireless business with Aircel and its results for the first quarter of 2016-17.

RCOM and Maxis Communications Berhad (MCB), together the promoters of Aircel, a pan-India mobile operator, announced the signing of definitive documents for the combination of their Indian wireless businesses through a merger on Wednesday.

RCOM and MCB will each hold a 50% stake in the merged entity (MergedCo), with equal representation on the board of directors and all committees. The new company will be managed by an independent professional team under the supervision of the board.

The MergedCo will have the second largest spectrum portfolio and the fourth largest customer base and revenue market share among all telecom operators in India. The management of RCOM and MCB expect significant capital expenditure synergies from the merger.

“While we view the combination of the wireless businesses positively, we will also need to re-evaluate the credit profile of RCOM in conjunction with the proposed organisational and financial restructuring, as the remaining business will be smaller in scale with—

in our view—a weaker business risk profile,” said Annalisa Di Chiara, a Moody’s vice-president and senior credit

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