RCom sells 5% in tower arm -Video

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Reliance Communications (RCom) today announced the sale of 5 per cent stake in its tower subsidiary, Reliance Telecom Infrastructure (RTIL), to seven institutional investors for $337.5 crore (Rs 1,358 crore), putting the valuation of RTIL at over Rs 27,000 crore.

RCom Chairman Anil Ambani said the stake sale would unlock value to the tune of Rs 135 a share for RCom shareholders, which is over 23 per cent of the company's share price. The sale, the first in the telecom tower industry, is expected to spur other operators to follow suit.

The announcement pushed the share price of RCom to a 52-week high of Rs 586.90. The stock closed at Rs 579.30 on the Bombay Stock Exchange, 2.13 per cent higher than yesterday's close.

Ambani, however, did not reveal the identity of the investors. He said: "The investors across the Europe, Asia and the US have agreed to pick up stakes. The offer was heavily subscribed with an order book of Rs 8,000 crore. We have selected seven investors from the pack." J P Morgan was the advisor for RCom.

Ambani said RCom, the country's second-biggest wireless operator, would take further steps to unlock the shareholders' value by selling stakes to strategic investors at higher prices and listing RTIL.

He, however, did not disclose any time frame for listing the company, which was embarking on an expansion plan to scale up its number of towers to 40,000 from the existing 14,000 by March, 2008, with an investment of Rs 8,000 crore.

By March 2008, RTIL would emerge as the "world's largest integrated tower company" with a net worth of Rs 47,000 crore and asset base of Rs 12,000 crore, he added.

While not disclosing the revenues of the company, he said the gross margin in the tower business was 20-30 per cent. The enterprise value of RTIL stood at Rs 36,000 crore, he said

The opportunity in the telecom infrastructure was huge in India, with the subscriber base expected to cross the 500 million mark in a few years from the existing 218 million.

Ambani pledged to spend Rs 15,000 crore this year in RCom to expand the company's customer base and network in the world's second-fastest growing mobile phone market.

RCom had floated its telecommunications infrastructure business as a separate subsidiary only three months ago to share towers, shelters, generators and battery back-ups with rivals such as Bharti Airtel. Industry sources said the valuation of RTIL within three months of its existence was "tremendous".