Reliance Communications Ltd. inked a binding contract with Brookfield Infrastructure and its institutional partners to sell its towers business.
The Anil Ambani-led company will receive an upfront cash payment of Rs 11,000 crore, which will be used solely to reduce its debt, according to the company's press statement.
Reliance Communications will also receive class B non-voting shares in the new tower company, providing 49 percent future economic upside in the tower business, based on certain conditions.Reliance Communications Statement
The company expects "significant future value creation" from these class B shares owning to the 4G rollout and the expected growth of the telecom industry.
New Tower Company
The tower business will be demerged into a separate company, which will be wholly owned by Brookfield Infrastructure.
Reliance Communications and Reliance Jio Infocomm Ltd. will continue to remain major long term tenants of the new tower company, along with other existing third party telecom operators.
The deal is subject to requisite regulatory approvals.
Debt Reduction
The Rs 11,000 crore from the Brookfield deal will help Reliance Communications pare its debt to around Rs 30,000 crore. |
On September 15, Reliance and Aircel Ltd. had announced a merger of their wireless business. That deal will help bring Reliance’s debt down by Rs 20,000 crore.
Tower Deals Galore
The last two years have seen a whole host of deals being struck in the telecom tower space. Idea Cellular Ltd. is in the process of transferring 4.85 percent stake in Indus Towers to Providence Equity, which will bring it down to stake to 12 percent.
Indus Towers is a joint venture between Bharti Infratel Ltd., Vodafone India Ltd. and Idea.
Bharti Airtel Ltd. is also looking to sell majority stake in its tower company, Bharti Infratel. Airtel currently holds 71.96 percent in Infratel, and has already sold stake to private investors like Temasek, KKR and others.
The Reliance Communications stock jumped 8.7 percent to Rs 38 on the Bombay Stock Exchange after the announcement of the deal.
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