Reliance Jio raises $750 million from Korean lenders

Mumbai: Reliance Jio Infocomm Ltd (RJio), a subsidiary of Reliance Industries Ltd (RIL), has raised $750 million (around Rs.4,815 crore today) from a Korean lender to fund its ongoing network roll-out under its fourth-generation (4G) telecom licence in India.

The loan, backed by export credit agency Korea Trade Insurance Corporation (K-Sure), was raised on 7 May and is guaranteed by RIL. It will be used to finance goods and services procured from two of its main vendors—Samsung Electronics Co. Ltd and Ace Technologies Corp.

“It has a door-to-door tenor of 12 years, including a two-year availability period and 10-year repayment period thereafter. The facility is funded by nine relationship banks of Reliance (RIL),” said a note issued by RJio on Wednesday.

These banks include Hongkong and Shanghai Banking Corp. Ltd (HSBC), Australia and New Zealand Banking Group Ltd, Banco Santander SA, The Bank of Tokyo-Mitsubishi UFJ Ltd, JPMorgan Chase Bank NA, Mizuho Bank Ltd and Sumitomo Mitsui Banking Corp., ING Bank and DZ Bank AG.

This is the second round of financing for RJio from K-Sure.

RJio has a pan-India unified licence to provide high speed 4G voice and data services across 22 telecommunication circles in India under the 2300 MHz band of spectrum. It also has spectrum in 800MHz and 1800MHz bands in 20 of total 22 circles in the country.

The company is setting up a coutrywide telecom network set to provide high speed internet connectivity, communication services and various other digital services in areas such as education, health care, security, financial services, government-citizen interfaces and entertainment.

The company has so far invested over $14 billion to set up the telecom infrastructure but has not announced any date for the rollout of its services. Mint in April had reported the company is likely to launch voice-based services in at least five cities by June-end. In an analyst meet on 17 April, the company had said that RIL chairman Mukesh Ambani will talk about its rollout plan during its annual general meeting expected to be held in mid-June.

The company, analysts say, is expected to make heavy losses in its initial years of operation due to the heavy capex without any roadmap to win market share from established players. The current capex of $14 billion is close to the money spent by India’s largest telecom company Bharti Airtel Ltd over its 23 years of existence.

“We expect RJio’s loss at Rs.53-54 billion (Rs.5,300-5,400 crore) in the first two years of operation (FY16-17),” said a December note released by Bank of America Merrill Lynch.