India's Reliance Communications Ltd (IPO)

Upcoming IPO: newswires say India's Reliance Communications Ltd. (532712.BY) is likely to file a prospectus for an IPO in Singapore of its undersea cable assets next week. Reliance hopes to raise as much as US$1b by selling up to 75% of its stake in the business trust formed to hold the assets on SGS. The IPO is expected to list by August, depending on market conditions. A successful listing would take Reliance Communications--India's second-largest mobile-phone operator by number of users--closer to cutting its massive debt. This comes at a time when India's telecom industry has been caught in a policy quagmire. The industry has been plagued with uncertainty caused by allegations of corruption in the allotment of cellphone-service licenses. Earlier this year, India's Supreme Court cancelled 122 such licenses awarded in 2008 and held by several Indian and foreign cellphone-service providers. India's mobile-phone companies were already facing lower profits because of high competition in the industry. Also, these companies had bid billions of dollars to get 3G cellphone-service licenses. But lower-than-expected demand for these services has forced them to cut tariffs by 60% to 70% over the past month. As their expansion plans have faltered, telecom companies which had borrowed heavily some years ago, are left saddled with debt. As of Mar 31, Reliance Communications' debt stood at US$6.58b. The upcoming IPO will be the second attempt by Reliance, owned by Indian billionaire Anil Ambani, to sell a stake in its undersea cable network. The network carries telecommunication signals across 65,000 km spanning Asia, the Middle East, Europe and the U.S. When Reliance tried to sell this unit in 2009, it didn't get the valuation it was seeking. The trust is expected to offer a 10% annual dividend yield to entice investors. This payout is likely to be a key attraction for investors, and thus help Reliance get a better price for its assets than an alternate financing structure. Earlier this year, Indian hospital chain-operator Fortis Healthcare also said it plans to list a business trust in Singapore to raise ~US$360m. The Fortis trust would invest mainly in medical and health-care assets and services.