Reliance Communications raises $1.5 billion; buys back FCCBs

Anil AmbaniIn one of the largest borrowing programmes amongst Indian telecommunication companies, Reliance Communications is said to have has raised a fresh line of credit of $1.5 billion from a consortium of international export development banks at lower than the prevailing commercial interest rates. These funds would be used to fund the launch of its national GSM services.

The company is reported to have raised the funds from the French Agence Fransaise De Developpement, China Development Bank and Export Development Canada at LIBOR plus 150 basis points, The Economic Times reports. The rate is significantly lower than the 10-11 per cent at which loans are available from commercial banks.

The lenders belong to countries whose leading telecom equipment manufacturers - Alcatel, Huwei and Nortel - are major vendors of the copmpany. However, it could not be ascertained whether the Indian telecom company is likely to place any fresh orders for GSM equipment from them. Typically, export development agencies generally give loans at a subsidised rates to companies that place bulk orders with firms belonging to their countries.

Funds put to use
Taking advantage of the new norms set by RBI, Reliance Communications has bought back its foreign currency convertible bonds (FCCB).

It said that in line with the approval from Reserve Bank of India, it has repurchased 250 "zero coupon" foreign currency convertible bonds (FCCBs) each of $100,000 aggregating to $25 million (approximately Rs21.22) at a discount of 52.5 per cent, which were extinguished 29 December 2008.

Reliance has also launched its GSM network today at an investment of Rs10,000 crore. It said the the GSM service would be available nationwide in over 11,000 towns.

The funds raised could also be used in part for funding the 3G auctions and the consequential services. $300 million could be used for the upcoming auction. Also an estimated $500 million for 3G spectrum and an additional $1 billion for network rollout.