Debt laden Reliance Communications Ltd (RCom) of the Reliance Anil Dhirubhai Ambani Group has signed a non-binding term sheet for 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.
Under the term sheet, the specified assets are intended to be transferred from Reliance Infratel (RITL) on a going concern basis into a separate special purpose vehicle (SPV), to be owned by Brookfield. RCom will continue as an anchor tenant on the tower assets, under a long term MSA, for its integrated telecommunications business.
It 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.
Shares of RCom went up by nearly 3 per cent after the announcement. The scrip soared 2.57 per cent to end at Rs 47.90 on BSE.
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.
Both the companies also see several opportunities for consolidation in the towers industry in India that will further enhance growth and value creation in the future. “RCom intends to utilise the proceeds of the proposed transaction solely to reduce its debt. The proposed transaction is subject to definitive documentation, customary approvals and certain other terms and conditions. Accordingly, there can be no certainty that a transaction will result. Further announcements will be made at an appropriate stage,” RCom said.
Brookfield is a leading global alternative asset manager with over $250 billion of assets under management. Brookfield has 700 investment professionals and 30,000 operating employees in 30 countries around the world. The move to sell Reliance Infratel has come about six years after a proposal for an initial public offering fell through due to stock market conditions, turmoil in the telecom industry, ongoing litigation and the absence of a clear valuation mechanism.