Anil Ambani’s Reliance Communications on Friday signed a non-binding deal with Canada’s Brookfield Infrastructure Group to sell a 51% stake in tower company Reliance Infratel for Rs 11,000 crore. Under the terms of the deal, the specified assets will be transferred from Reliance Infratel on a going-concern basis into a special purpose vehicle to be owned by Brookfield, in which RCom will hold 49% and continue to be an anchor tenant.
This is the second deal the group has signed in its efforts to cut RCom’s debt of around Rs 42,000 crore. The first, with Aircel, was signed in mid-September whereby the two firms will merge their wireless business to create a new 50:50 joint venture firm to which Rs 14,000 crore of RCom’s debt will be transferred.
The company said in a statement on Friday the upfront payment of Rs 11,000 crore that it will receive from Brookfield will be used to reduce the debt at RCom.
With Rs 14,000 crore removed from the books of RCom and another Rs 11,000 crore repaid, the company’s debt will come down by a total of Rs 25,000 crore. Once the final restructuring happens, RCom’s debt will come down to around Rs 17,000 crore from Rs 42,000 crore at the end of FY16. It expects to reduce the debt by another Rs 5,000 crore by monetising its real estate.
Further, RCom has retained a 49% stake in the tower firm, which it may monetise later as it expects considerable value creation in the next couple of years in view of likely significant growth in tenancies owing to spread of 4G networks.
Once the two transactions are closed, RCom will cease to be a mobile telephony firm but will turn into an enterprise firm with data centres, optic fibre global submarine cables, etc.
RCom had first entered into a similar non-binding pact in December 2015 with private equity firm Tillman Global Holdings and TPG Asia to sell Reliance Infratel, which it had valued at around Rs 21,000 crore. That deal did not go through over some valuation issues and it later signed a deal with Brookfield.
RCom, via an earlier deal with Sistema, acquired the latter’s 800/850 MHz spectrum across eight circles, which is valid till 2033. In return, Sistema picked up a 10% stake in RCom.
The new joint venture entity will have access to spectrum with a validity till 2033-35 and would not need to buy spectrum at the forthcoming auctions.