The Hindu Business Line : RCom sells 5% stake in tower biz

Reliance Communications has sold a 5 per cent equity stake in its wholly owned subsidiary Reliance Telecom Infrastructure Ltd for $337.5 million (around Rs 1,400 crore.)

This values RTIL at $6.75 billion or over Rs 27,000 crore, said Mr Anil Ambani, Chairman of RCom, at a news conference on Thursday. The equity stake is being picked up by seven different international investors, “big” and “well-known” names, but whose identity Mr Ambani would not disclose.

The equity stake was sold to unlock value for RCom shareholders, the Chairman said. It also establishes a benchmark valuation for RTIL, paving the way for further unlocking of value through a strategic sale or an initial public offering, he said. The valuation was based on discounted cash flows.

From this 5 per cent placement alone, RCom would make capital gains of Rs 1,200 crore, which would be reflected in the financial results for the current quarter.

RTIL will increase the number of its towers from 14,000 currently to 40,000 by March 2008, at a cost of Rs 8,000 crore. The company will raise debt of Rs 6,000 to Rs 8,000 crore on its own and without recourse to RCom, said Mr Ramesh Venkat, Group President, Finance & Treasury.

With RTIL’s networth at Rs 4,700 crore, and its debt at zero, the debt-equity ratio will rise to over 1:1, said Mr Venkat. However, being a fixed income company where a contract would be drawn up to fetch regular rentals, a tower infrastructure company can raise its debt: EBITDA ratio to 7 to 8 times, as against 3 to 4 times for a telecom services company, he said.

RCom would be the anchor tenant for RTIL and has signed a 10- year contract with it, he said. RCom’s stock gained by 2.13 per cent on BSE, to close at Rs 579.3 on Thursday.

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