 "RCom to sell 51% tower biz stake for Rs 11,000 crore")
Reliance Communications (RCom) said it would sell 51 per cent stake in its tower unit to Canada-based Brookfield Infrastructure Group for an upfront cash payment of Rs 11,000 crore.
The Anil Ambani-owned company plans to use the entire sale proceeds to cut debt. According to sources, RCom will retain 49 per cent in the business, which will be monetised later as it expects considerable value creation in the next couple of years.
The assets would be transferred from Reliance Infratel into a separate special purpose vehicle, to be owned by Brookfield. RCom will continue as an anchor tenant on the tower assets under a long-term master service agreement.
At a valuation of Rs 11,000 crore for 51 per cent stake, the enterprise value of the deal is around Rs 21,500 crore. RCom has 43,400 towers, and the value for each tower works out to Rs 49.7 lakh. In October 2015, American Tower Corporation had bought 51 per cent stake in Viom Networks for an enterprise value of Rs 21,000 crore, with each tower valued at Rs 50 lakh.
“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,” the company stated.
The proposed transaction is subject to regulatory approval, the statement added. The deal is one of the largest foreign direct investments coming into India in the infrastructure sector. It will help RCom cut down its debt substantially.
With the tower deal, the company’s debt is likely to be reduced to Rs 17,000 crore from the current Rs 42,000 crore.
Besides, the company plans to monetise its real estate to raise another Rs 5,000 crore and reduce the overall debt from Rs 17,000 crore to Rs 12,000 crore.
After the closure of the two transactions, RCom will retain a 50 per cent stake in combined wireless business and 49 per cent stake in tower business. Apart from that, it will have 100 per cent control of its Indian enterprise business, data centres, optic fibre, global submarine cables, etc.
The Anil Ambani-owned company plans to use the entire sale proceeds to cut debt. According to sources, RCom will retain 49 per cent in the business, which will be monetised later as it expects considerable value creation in the next couple of years.
The assets would be transferred from Reliance Infratel into a separate special purpose vehicle, to be owned by Brookfield. RCom will continue as an anchor tenant on the tower assets under a long-term master service agreement.
At a valuation of Rs 11,000 crore for 51 per cent stake, the enterprise value of the deal is around Rs 21,500 crore. RCom has 43,400 towers, and the value for each tower works out to Rs 49.7 lakh. In October 2015, American Tower Corporation had bought 51 per cent stake in Viom Networks for an enterprise value of Rs 21,000 crore, with each tower valued at Rs 50 lakh.
“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,” the company stated.
The proposed transaction is subject to regulatory approval, the statement added. The deal is one of the largest foreign direct investments coming into India in the infrastructure sector. It will help RCom cut down its debt substantially.
With the tower deal, the company’s debt is likely to be reduced to Rs 17,000 crore from the current Rs 42,000 crore.
Besides, the company plans to monetise its real estate to raise another Rs 5,000 crore and reduce the overall debt from Rs 17,000 crore to Rs 12,000 crore.
After the closure of the two transactions, RCom will retain a 50 per cent stake in combined wireless business and 49 per cent stake in tower business. Apart from that, it will have 100 per cent control of its Indian enterprise business, data centres, optic fibre, global submarine cables, etc.
According to sources, RCom does not require any major spend for spectrum or capex in the future. Post the merger with Sistema Shyam TeleServices and Aircel complete, and with spectrum sharing already implemented with RJio, it has extensive 2G, 3G and 4G networks operational across the country. The company will, thus, emerge a stronger telecom operator in the country, sources added.
