Mumbai: Reliance Communications Ltd is in advanced talks with American Tower Corp. to sell a stake in its telecom towers business, and is looking at a valuation of the unit of at least Rs35,000 crore, a person with knowledge of the talks said.
The size of the strategic stake being sold could be up to 21% of the infrastructure unit, the source said.
On 19 July, the company said it had sold a 5% stake in the unit, Reliance Telecom Infrastructure Ltd, to seven institutional investors for Rs1,400 crore, which it said valued the unit at Rs27,000.
“This time it will be a strategic investor. And American Tower seems to be very much interested. Reliance Communications is in talks to sell 15% or 21% in the towers business,” the source said, adding the deal could be announced in 1 month to 45 days.
Boston-based American Tower could not be reached immediately for a comment. Last month, American Tower chief executive James Taiclet said he was talking with major Indian telecom operators about possible alliances.
“We are initiating conversations, serious ones, with the carriers in the country,” Taiclet said in India on 24 July.
After announcing the 5% stake sale of the tower unit in July, Reliance Communications chairman Anil Ambani said more could be sold through an IPO or further placements.
An analyst said the higher valuation could be justified.
“My take is that they will have an average tenant base of 2.2 times (per tower) by fiscal year 2009. So a nearly $9 billion valuation is very much possible,” said Naveen Kulkarni, a telecoms analyst at Religare Securities.
“Tower business is such a business where cash flows are assured over a longer period.”
Indian telecom operators are looking to share infrastructure such as mobile phone towers to keep costs down amid intense price competition and a surge in low-income subscribers.
Reliance Communications has 14,000 towers and plans to add 23,000 in the fiscal year ending March 2008, and larger rival Bharti Airtel plans to add 30,000 during 2007-08.
Analysts say Bharti Airtel and Reliance Communications, which operate in all 23 of India’s telecom zones, would gain the most when others expand operations to small towns and rural areas.
Ambani said last month RTIL’s planned towers were expected to have a total tenant base of 1,00,000 by next March. Another group official had said the company was in talks with two to three mobile operators to have them as tenants on its towers.
Reliance Communications provides voice and data communication services on the CDMA platform across all of India’s 23 telecom zones. It also offers GSM-based mobile services in seven zones.