Anil Ambani’s R-Com, Brookfield close Reliance Infratel deal
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New Delhi: Reliance Communications Ltd (RCom) has agreed to sell a 51% stake in its mobile phone tower assets to Canada’s Brookfield Infrastructure Group for Rs11,000 crore in cash to reduce debt.
RCom will retain 49% in the tower assets business as the company expects significant growth in telecom tower tenancies over the next couple of years because of the spread of 4G networks and rising data consumption, the Mumbai-based company said in a statement on Friday.
The company, controlled by billionaire Anil Ambani, is selling assets to reduce debt and aims to turn net debt-free by 2017. RCom is the most indebted mobile phone service provider in India with debt of approximately Rs42,000 crore.
RCom is also merging its wireless business with smaller rival Aircel and has said that the deal will help reduce its leverage as it transfers a part of its debt to the new venture.
The stake sale in the tower assets unit and merger of its wireless business with Aircel will help RCom reduce its debt to Rs 17,000 crore, a person familiar with the matter said, requesting anonymity.
“RCom will further monetize its real estate to raise another Rs5,000 crore, and reduce the overall debt from Rs17,000 crore to Rs12,000 crore,” the person added.
Under the term sheet, the telecom tower assets will be transferred from Reliance Infratel Ltd to a separate special purpose vehicle to be owned by Brookfield, the statement. RCom will continue as an anchor tenant in the tower assets.
The Brookfield deal ensures RCom will not have to incur any operational or capital expenditure (capex) to manage its tower business, said an analyst who spoke on condition of anonymity.
“This is a favourable deal in terms of bringing FDI in telecom infrastructure...but how they use the benefit is dependent on their business plan,” the analyst said.
Ambit Pvt. Ltd and UBS AG advised Reliance Communications on the transaction.
RCom has a 96% stake in its tower unit Reliance Infratel.
Brookfield is a global asset management company with $250 billion worth of assets under its management and a leading infrastructure group.
According to Hemant Joshi, partner, Deloitte Haskins and Sells, the telecom industry is moving towards segregation of active infrastructure from passive, and tower assets fall in the latter category.
“In the industry, there is a move towards consolidation and monetization, especially the tower industry, and I see this accelerating with the companies focusing on management skills and reducing capital expenditure,” Joshi said.
“In the scenario of high investment in spectrum, stress on cash flows and falling ARPUs (average revenue per user), one way to minimise capex is to reduce it by sharing infrastructure.”
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.