Reliance Communications in Rs.22,000-crore towers deal (Roundup)

Industrialist Anil Ambani-led Reliance Communications on Friday announced the signing of a non-binding pact with the US-based Tillman Global Holdings and TPG Asia to sell its nationwide tower assets and related infrastructure for an undisclosed amount.

According to sources, however, the deal value is estimated at Rs.22,000 crore (nearly $3.4 billion) and the company intends to use the proceeds solely to retire its debts. The company expects another Rs.8,000 crore from inter-city and intra-city optic fibre assets in a separate deal.

Under the agreement, the specified assets are intended to be transferred from Reliance Infratel on a going concern basis into a separate special purpose vehicle, to be owned 100 percent by Tillman and TPG, the statement said.

While Tillman is holding company that invests mainly in telecom and energy infrastructure, TGP Asia is a global private equity investment firm with $74.3 billion of capital under management with interests across a wide spectrum of industries.

"RCOM will continue as an anchor tenant on the tower assets under a long term MSA (master service agreement) for its integrated telecommunications business. RCOM intends to utilise the proceeds of the proposed transaction only to reduce its debt," the statement said.

"The parties have entered into an exclusivity agreement valid till January 15, 2016. The proposed transaction is subject to final due diligence, definitive documentation, applicable regulatory and other approvals and certain other terms and conditions," the statement added.

"Accordingly, there can be no certainty that a transaction will result. Further announcements will be made at an appropriate stage."

Giving some more details of the deal, sources said the company intends to realise Rs.22,000 crore through sale of towers Rs.8,000 crore by way of fibre infrastructure.

This will enable the company to substantially cut its net debt by 75 percent -- from Rs.40,000 crore to under Rs.10,000 crore. This apart, the annual interests costs are also expected to come down by as much as 85 to Rs.600 crore.

This will eventually leave the company with among the lowest debts it the Indian telecom space.

Earlier in 2013, Reliance Jio had entered into an agreement with RCOM for sharing its extensive inter-city and intra-city infrastructure of nearly 520,000 km of optic fibre pairs, besides 45,000 towers. The aggregate value of the deal was pegged at Rs.12,000 crore (nearly $6 billion).

RCOM says it has a customer base of 118 million, including over 2.6 million individual overseas retail customers. Its corporate clients number nearly 40,000 Indian and multinational companies. Its network spans 21,000 cities and towns and some 400,000 villages.