Reliance Communications (RCom) on Wednesday signed a binding agreement with Canada-based Brookfield Infrastructure Group to sell a 51% stake in its tower company, Reliance Infratel, for a consideration of R11,000 crore.
The tower assets will be transferred from Reliance Infratel, on a going-concern basis, into an SPV (special purpose vehicle) owned by Brookfield. RCom will hold a 49% stake in the SPV and remain an anchor tenant. The firm said in a statement it will also receive B Class non-voting shares in the tower firm.
This is the second deal the Reliance Group has transacted since April as it attempts to pare debt in RCom of around R42,000 crore.
The first deal, with Aircel, was signed in mid-September whereby the two firms will merge their wireless businesses to create a new 50:50 joint venture firm. RCom’s will transfer R14,000 crore of debt to the joint venture.
RCom further said the upfront cash of R11,000 crore that it receives from Brookfield would be used to reduce the debt of the company. With R14,000 crore of loans going off the books of RCom and another R11,000 crore repaid, the company’s debt will come down by a total of R25,000 crore. Post the restructuring, RCom’s debt will come down to around R17,000 crore. It expects to reduce the debt by another R5,000 crore by monetising some real estate.
Further, RCom has retained a 49% stake in the tower firm, which it may monetise later. The firm expects considerable value creation in the next couple of years on the back of a growth in tenancies owing to spread of 4G networks.
Once the two transactions are closed out, RCom will cease to be a mobile telephony firm and will turn into an enterprise firm with data centres, optic fibre global submarine cables etc.
RCom had first entered into a non-binding pact in December 2015 with private equity firm Tillman Global Holdings LLC and TPG Asia Inc to sell its tower business, Reliance Infratel, which it had valued at around R21,000 crore. However, the deal fell through over differences in valuation.
Earlier, Sistema was merged with RCom, which gave the latter access to 800/850 MHz spectrum across eight circles, valid till 2033. In return, Sistema has picked up a 10% stake in RCom. The new JV entity’s spectrum is valid till 2033-35.