Anil Ambani-led Reliance Communications Ltd. (RCom) has signed a non-binding term sheet with Canadian Brookfield Infrastructure Group (Brookfield) to sell a majority 51 per cent stake of its nationwide tower assets and related infrastructure for cash consideration of Rs. 11,000 crores, making it one of the largest FDI in infrastructure sector.
Under the term sheet, the specified assets are intended to be transferred from Reliance Infratel Ltd. (RITL) on a going concern basis into a separate SPV, to be owned by Brookfield, said a RCom statement. It added that RCom will continue as an anchor tenant on the tower assets, under a long term MSA, for its integrated telecommunications business.
RCom and Brookfield expect considerable growth in tenancies based on increasing 4G offerings by all telecom operators, and the fast accelerating trends in data consumption, which are expected to contribute to significant growth in revenues and profitability for the towers business in the future, said the statement.
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.
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, in view of likely significant growth in tenancies owing to spread of 4G networks and fast increasing data consumption.
RCom will utilize entire Rs. 11,000 crore to reduce debt and the combination of RCom’s wireless business with Aircel will reduce RCom debt by another Rs. 14,000 crore.
These 2 transactions put together will reduce RCom debt by 60 per cent from Rs. 42,000 crore to Rs. 17,000 crore, while RCom will continue 50 per cent stake in combined wireless business, and 49 per cent stake in Towers business.
Besides, RCom will retain 100 per cent of its highly profitable Indian Enterprise business, Data Centres, Optic Fibre, global submarine cables, GCX, amongst other.
“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 source told The Hindu .
Analyst believes that RCom financials will improve in FY17 given it does not require any major spend for spectrum or capex in the future, as post the merger with SSTL and Aircel being completed, and with spectrum sharing already implemented with RJio, it has extensive 2G, 3G and 4G networks already operational 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
RCom shares were trading up 2 per cent at Rs 48.75 in an almost flat Mumbai market on Friday noon.
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 statement adding that further announcements will be made at an appropriate stage.
