RCom plans to hive off tower arm

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Reliance Infratel sale proceeds to clear debt.

Our Bureau

Mumbai, June 14

Anil Ambani-controlled Reliance Communications has decided to offload stake in its tower company by hiving it off into a separate entity and use the proceeds to clear its debt.

In a communication to the stock exchanges, the company said its board has approved a proposal to restructure ownership of Reliance Infratel, a 95 per cent subsidiary of Reliance Communications.

The stake sale is expected to help RCom bring down the Rs 15,000-crore debt sitting on the books of Reliance Infratel. This would help RCom realise a better valuation for the 26 per cent stake that it has decided to sell.

According to sources, the assets of Reliance Infratel will be transferred to a special purpose vehicle which will see participation from other companies as well. However, the company did not spell out details of how much stake RCom will retain in the SPV.

“RCom could ideally be looking at retaining a 26 per cent stake in the SPV and sell chunks of 10-15 per cent each to multiple players. In doing so, the company may end up being the majority shareholder, if not the single largest shareholder,” Mr Raman K, Practice Head (Telecom Media and Technology) at Tata Strategic Management Group, told Business Line.

The RCom Chairman, Mr Anil Ambani, said in a statement: “I am personally looking forward to an era of healthy cooperation and collaboration with existing and new players, especially recent winners of 3G and BWA (broadband wireless access) spectrum.”

Mr Ambani's comments further fuel speculation that RIL may be one of the players interested in acquiring stake in the SPV.

Recently, the Ambani brothers decided to bury their differences and cancel all their non-compete agreements. Mr Anil Ambani even extended an olive branch to RIL, which ventured into the Indian broadband market through its $1-billion acquisition of Infotel, by offering its telecom infrastructure for RIL's latest initiative.

However, industry sources indicate that RIL may take a call on it in “due course”.

“Buying stake in RCom's tower business is surely an option that RIL has…however, it is too early too say whether RIL will take that route or decide to lease infrastructure towers,” they said. RIL recently told analysts that it will need 15,000 towers for its broadband venture.

For the record, RCom said it is in “advanced stage” of discussions with several local and international strategic and financial players to sell a stake in Reliance Infratel in a cash and stock transaction and is expected to announce a deal shortly.

Another name doing the rounds is that of GTL Infrastructure, which had snapped up Aircel's portfolio of 17,500 telecom towers early this year.

However, the company may be interested only if it gets at least 26 per cent of the SPV along with management control, sources said. Anything less than 26 per cent would make GTL a mere financial investor in the SPV.

On being contacted, a GTL spokesperson said: “We do not comment on market speculation.”

The RCom scrip increased by 3.71 per cent to close at Rs 179 on the Bombay Stock Exchange on Monday.

Related Stories:
Reliance Infratel IPO gets SEBI approval
RCom to transfer optical fibre biz to Reliance Infratel

(This article was published in the Business Line print edition dated June 15, 2010)
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