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Reliance Communications Seeks $1 Billion Five-year Bank Loan

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Reliance Communications Seeks $1 Billion Five-Year Bank Loan

By Patricia Kuo

Sept. 1 (Bloomberg) -- Reliance Communications Ltd., India's second-largest mobile-phone operator, is seeking to borrow $1 billion for general working capital, three people involved with the deal said.

Lenders may require Reliance Communications to pay at least 2 percentage points above the London interbank offered rate for the five-year bank loan, said the people, who declined to be identified because the information isn't public. Gaurav Wahi, a spokesman for Reliance Communications, declined to comment on the report when contacted on his mobile phone today.

Reliance Communications, controlled by billionaire Anil Ambani, is seeking new funds to expand as it builds a new nationwide phone network to compete with rival Bharti Airtel Ltd. for a bigger share of the world's second-biggest wireless market.

Reliance Communications spent $1.6 billion in the quarter ended June and is ``on track'' to spend a total of $6 billion for the year ending March 31, the company said on July 31. Ambani said in April he may spend as much as $6.5 billion this year to boost coverage.

The Mumbai-based company is paying interest at 0.54 percentage point above the Libor for a six-year $1 billion loan signed in August 2007, data compiled by Bloomberg show.

Reliance Communications posted a 24 percent increase in profit for the three months ended June 30 to 15.1 billion rupees ($344 million) after adding less profitable customers in rural areas. Reliance Communications and Bharti failed in separate bids to merge with South Africa's MTN Group Ltd., forcing them to compete in India's villages and towns to bolster profit growth.


Ambani's global expansion plans suffered a setback after ending talks with MTN, Africa's largest wireless carrier, on July 18. Ambani, the world's sixth-richest man according to Forbes magazine, failed to resolve a dispute with elder brother Mukesh Ambani, whose Reliance Industries Ltd. claimed the first right of refusal in any stake sale by Reliance Communications.

Reliance Communications, which mainly offers code division multiple access or CDMA services, had 50.8 million subscribers at the end of June. Bharti had 69.4 million customers while Vodafone Group Plc's local unit had 49.2 million, all of them on the global system for mobile communications or GSM platform.

India overtook the U.S. this year to become the world's largest mobile-phone market after China, according to the nation's telecom regulator. The South Asian country had 287 million wireless subscribers at the end of June, or about one in four people in the nation of more than 1.1 billion. That compares with 41 percent in China, 84 percent in the U.S., and 122 percent in the U.K., according to Reliance Communications in May.

India's mobile users will increase to 737 million by 2012, a 21 percent annual compounded growth from 2008, analysts Madhusudan Gupta and Nick Ingelbrecht at researcher Gartner Inc. said in a report dated July 2.

Credit-default swaps on Reliance Communications were quoted at 450 basis points at 11:15 a.m. in Hong Kong, according to BNP Paribas SA's prices. That means it costs $450,000 a year to protect $10 million of its debt from default for five years.

To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.

Last Updated: September 1, 2008 02:27 EDT

Link: http://www.bloomberg.com/apps/news?pid=206...amp;refer=india

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dunno know how much loan will nail take . . . god will only help him!.

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They were in plan for IPO for this fund.

But after the debacle of Rpower they dump infratel IPO and now going to banks for money as shares prices are not also supporting.

Ill suggest them to sell stocks to FIIs on premium instead of loan.

But its huge amount. jo bhi hai Rcom ROX.

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