Close on the heels of announcing that it will divest up to 26% in the company, Reliance Communications Ltd (RComm), which has a total debt of Rs 33,000 crore on its books, on Monday said it will restructure its ownership in its telecom towers arm, Reliance Infratel Ltd, to bring in new investors and improve financial flexibility.
The boards of RComm and its subsidiary, Reliance Infratel approved a proposal to restructure the former’s ownership through a demerger, thereby creating ‘the world?s largest independent telecom infrastructure company, not owned and/or controlled by any telecom operator’.
RComm?s residual 95% stake in RTIL is valued at $6.40 billion (Rs 26,000 crore). The company has a current tenancy ratio of 1.7. Both firms are in advanced stages of discussions with several domestic and international strategic and financial players to finalise the proposal for a stake sale, and a transaction is expected to be announced shortly. GTL, Crown Castle and American Tower Company (ATC) are the likely front-runners in picking up a stake in Infratel, sources said.
?This transformational proposal will be implemented through demerger or other suitable value creating options vis-a-vis Infratel’s assets, subject to necessary approvals, with the consideration to be received in a combination of cash and stock,? RComm said in a media statement.
Currently, Reliance Infratel has 50,000 towers and is expected to increase this number to 75,000 towers in the span of three years.
?A change in ownership will allow service operators to use their network, leading to increase in tenancy ratio of Infratel. However, there is no clarity as to how much of the 95% stake RCom is giving up,? said an analyst on the condition of anonymity.
The move will lead to substantial reduction in RComm?s consolidated debt and improved leverage ratios for the company, contributing to enhanced financial flexibility.
Reliance Infratel had planned an IPO of shares as long ago as in February 2008, but the public issue is yet to hit the market. The interests of RComm as Infratel’s continuing largest tenant will be protected through appropriate contractual arrangements, the statement said.