RCom shares rally on tower deal plans

RCom shares rally on tower deal plans

New Delhi: Reliance Communications shares rose more than 5% early on Tuesday on hopes the Indian mobile carrier’s plan to bring investors into its tower arm will help reduce its huge debt.

Reliance Comm, India’s No. 2 cellular carrier, said on Monday its board had approved a proposal to open up the tower unit to investors and help create an independent tower company. The tower unit could be valued at more than $5 billion based on recent telecom tower deals in the Indian market.

On Tuesday, the Economic Times named American Tower, a consortium of private equity firm Blackstone and Crown Castle International, and India’s GTL among suitors for Reliance Comm’s tower unit.

The announcement follows a recent plan to sell as much as 26% of the parent mobile carrier, which is facing a fiercely competitive local market and the heavy cost of rolling out third generation services.

“The game plan is to add as much as ammunition possible to your balance sheet," said Jagannadham Thunuguntla, head of equity at SMC Capitals in New Delhi. “Be it a stake sale in the mobile company or the tower unit."

Reliance Comm, controlled by billionaire Anil Ambani, owns 95 percent of the tower unit. The company said on Monday it was looking at options including a “demerger and/or other suitable value-creating options" for the tower unit’s assets, and would be paid in cash and stock.

Reliance Comm, which had earlier planned to sell 10% of Reliance Infratel through an initial public offering, said it was in “advanced stage" talks with several international and local strategic and financial players for the tower unit and expected to announce a deal shortly.

“The Infratel IPO doesn’t seem to be happening - the over all market conditions are not great and the mood in the telecoms sector is also not favourable. So how to monetise the assets in one form or the other," Thunuguntla said.

Reliance Comm shares were up 2% at Rs183.35 by 9:55am in a flat Mumbai market, having risen as much as 5.2% in early deals. More than 4.5 million shares had changed hands on the National Stock Exchange, compared with full-day average volume of 9.3 million in the past 30 days.

After being one of the worst performers in the benchmark index for much of 2010, the stock has erased losses for the year on talks for the stake sale and are up more than 6 percent in the year to date.