Apparently even big dividends were not enough to lure investors in Singapore to put their money into the 75% of Reliance Communications' submarine cable unit that was up for sale under the name Global Telecommunications Infrastructure Trust. The IPO has been shelved in the face of unfavourable market conditions, and with it the $1B that Reliance hoped to raise to reduce its overall debt.
Reliance had been struggling to generate interest in the IPO even while sweetening the pot with a dividend of around 10%. Of course, it's not completely over, as the company says it will await supportive market conditions before proceeding with the IPO.
Reliance has been looking for a way to monetize its Globalcom division for several years now, but has been unable to find anyone willing to meet its price. Along with Flag, the division also consists of the former Yipes and Vanco assets, which they purchased for a combined $600M or so between 2003 and 2008.
After two years of rumors about Reliance shopping the assets, the IPO plan started to take shape back in January. But at the same time, other valuations for related companies started coming in weak. Cable & Wireless Worldwide sold out for a song, and we have seen Indonesia's PT Telkom bail on a bid for Pacnet.
It's a difficult, competitive business that doesn't share the same economics as terrestrial fiber. In a difficult economic environment with a zoo of new projects looking for capital and a rapidly evolving technological landscape, it really shouldn't be a surprise that investors would be skittish about older cable assets.
The question now is what Reliance will do next. Do they put the Globalcom assets back on the market with a more realistic price tag? Or do they find a way to put money into the business to keep it competitive when a better window opens up in a few years?
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