Reliance Communications' asset sale draws little interest

After putting its network assets on the auction block in December, India's Reliance Communications hasn't gotten any serious takers.

Consisting of three main assets--the undersea FLAG optical network, Ehternet provider Yipes, and Virtual Network Operator Vanco--a Reuter's story revealed that sources close to the deal said that Reliance had extended its late-January deadline to bid, but even with the extension hardly anyone came forward with an offer.

Sources did reveal that Singapore Technologies Telemedia is mulling over whether to make an offer, but has refused to say anything publicly. NTT has also been cited as a possible buyer, but a company spokesperson immediately denied that they had made a bid on the assets.

There are a few theories as to why the assets are drawing such scant interest. First off, there are concerns over the debts the Reliance assets carry. After all, Reliance bought FLAG out of bankruptcy, while Yipes was bought from a third-party company that also brought it out of bankruptcy.

Then there's the reportedly $3 billion price tag that Reliance put on the assets. It's possible that would-be bidders may not want to pay that much for the assets. One source said the assets aren't worth more than $600 million.

"How could they possibly believe the thing is worth five times what it was four years earlier?" the source said.

At this point, however, Reliance continues to publicly state that it's not selling the assets even though Reuters said it found documents that prove they are indeed up for sale. One reason why Reliance is considering selling off these assets is due to a drop in company revenues. As of the end of December 2009, Reliance GlobalCom's revenue dropped 12.5 percent to $428 million.

For more:
- Reuters has this article

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