Reliance Communications Ltd. (RCom) has agreed to sell a 51 per cent stake in its nationwide tower assets to Canada’s Brookfield Infrastructure Group in a Rs.11,000 crore cash transaction that will help the Anil Ambani-led phone operator pare its debt.
Anchor tenant
As part of the deal, the specified assets that include related infrastructure would be transferred from Reliance Infratel Ltd. (RITL) on a going concern basis into a separate SPV, to be owned by Brookfield, RCom said in a statement. It added that RCom would continue as an anchor tenant on the tower assets, under a long-term service agreement, for its integrated telecommunications business.
RCom and Brookfield expect considerable growth in tenancies based on increasing 4G offerings by all telecom operators, according to the statement. That combined with the fast accelerating trends in data consumption are expected to contribute to a significant growth in revenues and profitability for the towers business in the future.
RCom and Brookfield also see several opportunities for consolidation in the towers industry in India that will further enhance growth and value creation in the future. RCom intends to utilize the proceeds of the proposed transaction solely to reduce its debt.
The tower assets transaction will help RCom improve its financials and business outlook in the current fiscal year, according to analysts.
This is particularly so as the company does not require to incur any major expenditure for spectrum or capex in the future, since post the merger with SSTL and Aircel and with spectrum sharing already implemented with RJio, it would have access to extensive and operational 2G, 3G and 4G networks across the country.
“RCOM will emerge as one of the stronger telecom operators in the country post the strategic transactions that are under implementation,” said Paras Bothra, vice president of equity research, at Ashika Stock Broking Ltd.
Shares of RCom rose 2.6 per cent to close at Rs.47.90 on the BSE on Friday.
RCom will retain 49 per cent stake in the business to be monetised later, as it expects considerable value creation in the next couple of years.
The proceeds from the deal, combined with the Rs.14,000 crore that the company will net from the combination of its wireless business with Aircel will help RCom reduce its debt by 60 per cent from Rs.42,000 crore to Rs.17,000 crore. RCom will also continue to hold a 50 per cent stake in the combined wireless business.
Besides, RCom will retain 100 per cent of its highly profitable Indian enterprise business, data centres, optic fibre, and global submarine cables among other assets.
The proposed transaction is subject to definitive documentation, customary approvals and certain other terms and conditions. Accordingly, there can be no certainty that a transaction will result, said the company, adding that further announcements will be made at an appropriate stage.
Monetize real estate
“RCom is planning to monetize its real estate to raise another Rs.5,000 crore and reduce overall debt from Rs.17,000 crore to Rs.12,000 crore,” a group official, who did not wish to be identified, told The Hindu .
