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RCom gains after inking pact with Brookfield for sale of telecom tower business

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Communications rose 2.14% to Rs 47.70 at 14:00 on after the company announced that it has signed term sheet with Brookfield Infrastructure Group for sale of its telecom tower business.

The announcement was made during market hours today, 14 October 2016.

Meanwhile, the Sensex was up 38.68 points, or 0.14%, to 27,681.79.

On BSE, so far 18.77 lakh shares were traded in the counter, compared with an average volume of 27.14 lakh shares in the past one quarter. The stock hit a high of Rs 48.40 and a low of Rs 46.20 so far during the day. The stock hit a 52-week high of Rs 91.80 on 1 January 2016. The stock hit a record low of Rs 42.10 on 29 September 2016. The stock had underperformed the market over the past one month till 13 October 2016, falling 6.04% compared with 2.51% fall in the Sensex. The scrip had also underperformed the market in past one quarter, dropping 8.16% as against Sensex's 0.62% drop.

The large-cap company has equity capital of Rs 1244.49 crore. Face value per share is Rs 5.

Communications (RCom) announced the signing of a non-binding term sheet with Brookfield Infrastructure Group (Brookfield) in relation to the proposed acquisition of RCom's nationwide tower assets and related infrastructure by Brookfield.

RCom said that under the term sheet, the specified assets are intended to be transferred from Infratel (RITL) on a going concern basis into a separate special purpose vehicle (SPV), to be owned by Brookfield. RCom will continue as an anchor tenant on the tower assets, under a long term MSA, for its integrated telecommunications business.

RCom will receive an upfront cash payment of Rs 11000 crore from the proposed transaction. RCom will also enjoy 49% future economic upside from the towers business, based on certain conditions. RCom and Brookfield expect considerable growth in tenancies based on increasing 4G offerings by all telecom operators, and the fast accelerating trends in data consumption, which are expected to contribute to significant growth in revenues and profitability for the towers business in the future.

RCom and Brookfield also see several opportunities for consolidation in the towers industry in India that will further enhance growth and value creation in the future. RCom intends to utilize the proceeds of the proposed transaction solely to reduce its debt. The proposed Transaction is subject to definitive documentation, customary approvals and certain other terms and conditions. Accordingly, there can be no certainty that a transaction will result. Further announcements will be made at an appropriate stage, RCom added.

RCom's consolidated net profit rose 5.9% to Rs 54 crore on 3.8% decline in net sales to Rs 5247 crore in Q1 June 2016 over Q1 June 2015.

RCom is an integrated telecommunications service provider.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, October 14 2016. 14:08 IST