Anil Ambani’s statement that Reliance Communications Ltd (R-Com) is at an advanced stage of negotiations for the sale of its tower business did little to soothe investors’ nerves. R-Com’s shares fell 3% on Wednesday, much higher than the 0.5% drop in the Nifty of the National Stock Exchange.

Investors also disregarded the chairman’s statement that the promoters plan to raise their stake in the company to the maximum permissible 75%.

On past occasions, R-Com shares have skyrocketed, even if only temporarily, whenever rumours of the sale of its tower business hit the markets. Why are investors being lukewarm now?

It seems to be the case that investors are tired of waiting for the deal to happen. Based on news reports, the company has been in advanced negotiations for the sale of its tower business since at least mid-2007, and no deal has materialized yet.

Also, even if R-Com is able to thrash a deal with a consortium of private equity (PE) firms, as Ambani alluded to, valuations may not be as attractive as say, about a year ago.

According to a report in The Times of India newspaper, two PE firms have jointly put in a bid that values R-Com’s tower business at $4 billion (around 19,600 crore). This is about 20% lower than the $5 billion valuation R-Com has reportedly been looking for.

But more importantly, as an incisive report by Kotak Institutional Equities put it earlier this year, while the sale of the tower business will help the company reduce its debt, it will not lead to value creation.

On one hand, R-Com’s debt servicing burden will come down; on the other, it will start paying lease rentals. It’s critical, therefore, to look at the lease rentals R-Com will agree to with the new owners, before judging whether the deal is positive or not for the company. Just looking at the valuation and that the debt will reduce won’t reveal the complete picture.

Given these variables and that this is one of the many occasions R-Com has been in advanced negotiations to sell its tower business, investors have done well to curtail their excitement, unlike previous occasions.