Reliance Communications Ltd , India's fourth-biggest cellular carrier by customer base, said on Friday it signed a non-binding term sheet with Brookfield Infrastructure Group to sell its tower assets in a deal that could fetch it an upfront 110 billion rupees ($1.65 billion).
Reliance Communications Ltd (RCom) today announced the sale of 51 per cent stake in its telecom tower business to Canada-based Brookfield Infrastructure Group, for an upfront cash payment of Rs 11,000 crore.
“RCom will receive an upfront cash payment of Rs 11,000 crore from the proposed transaction. RCom will also enjoy 49 per cent future economic upside from the towers business, based on certain conditions,” the company said in a statement here.
RCom plans to utilise the sale proceeds to reduce debt, the statement added.
Sources pointed out that RCom will retain 49 per cent stake in the business to be monetised later, as it expects considerable value creation on account of projected growth in tower tenancies over the next couple of years.
Announcing the signing of a `non-binding term sheet’ with Brookfield Infrastructure Group for the proposed sale of tower assets, an RCom statement said that the specified assets are intended to be transferred from Reliance Infratel Ltd on a going concern basis into a separate SPV, to be owned by Brookfield.
RCom will continue as an anchor tenant on the tower assets under a long-term MSA (master service agreement) for its integrated telecommunications business.
“RCom and Brookfield expect considerable growth in tenancies based on increasing 4G offerings by all telecom operators, and the fast accelerating trends in data consumption, which are expected to contribute to significant growth in revenues and profitability for the towers business in the future,” the statement added.
The proposed transaction is subject to definitive documentation and customary approvals, it said.
Meanwhile, sources pointed out that the tower sale deal along with the recently-announced merger of RCom’s wireless business with Aircel — will together reduce the company’s debt by nearly 60 per cent to Rs 17,000 crore, from about Rs 42,000 crore.
RCom further plans to monetise its real estate business to raise another Rs 5,000 crore, and thereby reduce overall debt to Rs 12,000 crore, sources added.
“RCom also does not require any major spend for spectrum or capex in the future, as post the merger with SSTL (Sistema Shyam Teleservices Ltd) and Aircel being completed, and with spectrum sharing already implemented with RJio, it has extensive 2G, 3G and 4G networks already operational across the country,” sources said.