If news reports were to be believed, Reliance Communications Ltd’s (R-Com) tower infrastructure business should have got a strategic investor at least four years ago. In July 2007, a news report suggested that the firm was in advanced negotiations with three top US-based telecom tower firms for divesting a strategic 26% equity stake in its tower infrastructure subsidiary.

While the report was way off mark, at least some deal materialized. A few weeks later, the company announced that it had made a private placement amounting to a 5% shareholding in its tower business to seven private equity firms.

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But since then, ever so often, reports about the induction of a strategic partner or the complete sale of R-Com’s tower business surface, without actually resulting in any deal. The firm came close to a deal with GTL Infrastructure Ltd last year, but that, too, was eventually called off. Earlier this year, there were reports that American Tower Corp. had emerged as the highest bidder for the firm’s tower business.

While all of the above-mentioned deals have failed to consummate, R-Com’s investors have never failed to get excited about news that the tower business will soon be sold. Every time there are reports about a possible sale, R-Com shares rally. It’s no different this time around. The company’s shares have risen by about 17.5% from their lows in end-May and about 8% after the firm announced it had received several indicative offers for acquiring a controlling stake in its tower arm.

According to a Bloomberg report, the company has received offers from TPG Capital LP, the Carlyle Group, the Blackstone Group LP and Apax Partners LLP. But investors must note that such names have floated around even in the past. This is not to dismiss reports that the firm is in talks with prospective investors; still, it may be premature to conclude that a deal will happen. And while there may be offers on the table, a deal will happen only when R-Com is comfortable with the valuations being offered.

Besides, while any deal to sell the tower business will help the firm reduce its debt, it will not be a big positive in the overall scheme of things. This is because R-Com would have to pay the new owner lease rentals to use the tower infrastructure. As a report by Kotak Securities Ltd put it a few months ago, “Any tower sale deal will offer just value realization and not value creation. Reliance’s towers have very little external tenancy and the deal valuation (or speculative news flow on the same) would reflect the tower lease terms that R-Com agrees to in the transaction. Essentially, it’s a sale-and-lease-back transaction. A high/low tower sale valuation would reflect the high/low lease rentals agreed upon."

Graphic by Yogesh Kumar/Mint

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