RIL's telecom plans risky: Moody's

New Delhi, Jun 21 (PTI) International rating agency
Moody's Monday said the risk profile of Reliance Industries
has increased following its entry into untested telecom space
by acquiring Infotel Broadband Services, but has retained the
outlook of the Mukesh Ambani-owned company.

Despite the increased business risks, the rating agency
affirmed Baa2 ratings, three notches down from the highest
grade, with a stable outlook for RIL, Moody's Investor Service
said in its weekly outlook.
"Its strong financial balance sheet, with current cash
and cash equivalents of more than USD 6 billion, and USD 7-8
billion in projected annual cash flow, can easily accommodate
the price tag for Infotel and the expected USD 2-3 billion in
additional capital outlays (excluding licence fees) during the
initial years," it said.
Earlier this month, RIL acquired 95 per cent stake in
Infotel for Rs 4,800 crore (a tad over USD 1 billion), soon
after the HFCL Group promoted Infotel bagged the national
licence for broadband wireless access (BWA) radio waves.
The buyout, it said, has "negative credit implications by
making a strategic move into the untested but promising
wireless broadband spectrum technology in the country".
However, it added, RIL's move represents a big bet on the
future of the highend communications market in the country.
As part of its telecom foray with the Infotel deal, RIL
is opting for an unproven long-term evolution (LTE) 4G
technology that has had commercial trials so far only in
Norway and Sweden. Moody's further said the ADAG Group's
Reliance Communications and Vodafone, both of which
participated in the 3G auctions, pulled out of the BWA
auctions, citing high cost.
"Prices for 4G spectrum are at about the level where
3G prices were 10 years ago when European telcos paid USD 100
billion for licences. Nevertheless, RIL has calculated that
nationwide access to the world’s fastest-growing telecom
market, which is adding up to 20 million new mobile
subscribers a month, is worth the price," it said.
Moody's said RIL's increasing appetite for growth and
diversification in geography, sectors, and relatively unproven
technologies is also demonstrated in its shale gas deal with
US-based Atlas Energy.
In April, RIL struck a deal with Atlas Energy to invest
USD 5.2 billion over the next 10 years on a joint venture to
develop shale gas reserves in the Eastern US, it said, adding,
the the company was also reported to be in talks to invest
with Pioneer Natural Resources to exploit similar reserves in
the Southwestern US. PTI RMI