RCom plunges as tower assets sale talks delayed

Telecom major's stock fell 6.29% to close at Rs 73 on BSE on Friday

The Reliance Communications’ stock lost 6.29 per cent to close at Rs 73 on the BSE on Friday, as TPG Capital and Tillman Global Holdings extended their talks to buy its cell towers by two weeks.

The BSE Telecom Index was down 2.5 per cent to 1,251.8 on Friday.

RCom had entered into a non-binding agreement on December 4 with the two private equity players to sell subsidiary Reliance Infratel’s cell towers. Though the deal size was not disclosed, independent estimates put the value of Reliance Infratel’s  45,000 towers at Rs 20,000 crore.

The Street is cautious because RCom had once failed to sell its towers. In July 2010, GTL Infrastructure had agreed to buy these assets, but could not agree on a valuation. Earlier in 2008, RCom ended an exclusive stake sale agreement with South African telecom company MTN.

“There are disagreements over tower lease valuations,” said an analyst with a foreign brokerage who did not wish to be named. “It is not just a simple sale. RCom will again use these towers on lease,” the analyst added.

RCom will spin off a special purpose vehicle to be owned by the two private equity players for transfer of the towers from Reliance Infratel.  RCom owns about 96 per cent in Reliance Infratel and the rest of the stake is held by institutional investors. After the transfer, RCom will continue to remain the anchor tenant on the towers.

“This is a multi-billion dollar deal and it takes time to reach a decision. Besides, talks could not take place because of the year-end holidays and, hence, the two-week extension. The deal might come through by the end of this month,” said a person familiar with the matter.

The deal is crucial for RCom as it seeks to pare debts of around Rs 40,000 crore. An RCom spokesperson declined to comment on the matter.