RCom to sell towers biz to Tillman, TPG for Rs 21,500 cr

Non-binding pact signed; optical fibre network sale may fetch another Rs 7,500 crore

Anil Ambani-owned Reliance Communications (RCom) has signed a non-binding agreement with private equity firms TPG Asia and Tillman Global Holdings to sell its telecom towers and related infrastructure. The company did not mention the deal size, people familiar with the developments said the 45,000-strong tower assets would be valued at Rs 21,500 crore.

Tillman and TPG, the company said, would also evaluate purchase of its inter- and intra-city optical fibre assets in a separate deal and negotiations will take place simultaneously. The valuation of this deal is learnt to be at least Rs 7,500 crore.

If the deals fructify, it would substantially reduce RCom's consolidated debt of Rs 39,895 crore as on September. The deal proceeds could help the company bring down interest cost to Rs 600-800 crore from Rs 3,500 crore at present, analysts said.

ASSET MONETISATION

• Exclusivity agreement valid till January 15, 2016, conclusion subject to final due diligence and regulatory approvals
• Tower assets would be transferred from Reliance Infratel on a going concern basis into a separate special purpose vehicle, 100% owned  by Tillman and TPG
• If the deals fructify, it will substantially reduce RCom’s consolidated debt of Rs 39,895 crore as on September this year

The non-binding agreement would be valid till January 15 and conclusion would be subject to due-diligence and regulatory approvals, the company said on Friday, adding the money would be used for reducing debt.

The tower assets will be transferred from Reliance Infratel on a going concern basis into a separate special purpose vehicle owned by Tillman and TPG.

RCom will continue as an anchor tenant on the towers, while Reliance Jio, Mukesh Ambani's telecom business, will continue to get discounted rates.

RCom owns 96 per cent of Reliance Infratel and the rest is held by minority and institutional investors, including Drawbridge Towers, Investment Partners B (Mauritius), George Soros' Quantum (M), NSR Partners and others. The stock markets were, however, not enthused by the deal announcement, after initial enthusiasm. The RCom stock was down 3.11 per cent and closed at Rs 81.05 on the BSE, after a peak of Rs 86.45.

RCom was till July looking at divesting 50 per cent in Reliance Infratel for Rs 25,000-30,000 crore. It was also looking at transferring Rs 8,000 crore of Reliance Infratel's debt to the tower company after divestment. "The valuation per tower is expected to be Rs 45-50 lakh, far below Bharti Infratel's valuation of Rs 80-85 lakh," said Navin Kulkarni, co-head of research at Phillip Capital.

Sudip Bandopadhyay, market expert, said it was a very positive development for the company. "With the huge debt, they (RCom) had no option but to sell some of their assets. They have been trying to sell these assets for long and we hope they will realise good cash flows out of this transaction once concluded." Also, the valuation of towers has been a fair one, while it was on the premium side in the recent deal of ATC-Viom.

Indus Towers, a venture between Bharti, Vodafone and Idea, is the leading player in the Indian cellular tower industry with 116,454 towers, followed by Bharti Infratel with 86,397 towers. Bharti Infratel holds a 42 per cent stake in Indus Towers.

In October, American Tower Corporation acquired a 52 per cent stake in Viom Networks for Rs 7,635 crore. The valuation of telecom towers in that deal was at the premium end.