Anil Ambani controlled Reliance Communications on Wednesday signed a binding agreement with Canada’s Brookfield Infrastructure for selling a stake in its mobile phone tower business. The two sides had signed a non-binding pact in October. Under the terms of the deal, Reliance Communications is to receive an upfront payment of Rs 11,000 crore which it has said will use to cut its debt load. RCOM will also receive Class B non-voting shares in the new Tower company, providing 49% future economic upside in the Towers business, based on certain conditions. RCOM expects significant future value creation from the B Class shares. RCOM’s telecom towers will be demerged into a separate new Company that will be 100% owned and independently managed by Brookfield Infrastructure.
RCOM and Reliance Jio will continue as major long term tenants of the new Tower company, along with other existing third party telecom operators. The already announced combination of RCOM’s wireless business with Aircel, and the monetisation of the Tower business, will together reduce RCOM’s overall debt by Rs 31,000 crore, or nearly 70% of existing debt.
RCOM will continue to hold 50% stake in the wireless business combination with Aircel and the 49% future economic upside in the towers business, and will monetise these valuable assets at an appropriate time in the future to further substantially reduce its overall debt.