Rel-Infratel recast as independent unit

Anil Ambani group today decided to separate tower business of its telecom arm Reliance Communications.

Anil Ambani group today decided to separate tower business of its telecom arm Reliance Communications to create an independent firm,saying it was in advanced stage of talks for stake sale in the new entity.

The purpose of creating a separate firm is to secure business from other telecom and broadband players,including Mukesh Ambani-led RIL,while at the same time cutting debts of RCom,which has also decided for a strategic sale of 26 per cent equity.

Following the spin-off,Reliance Infratel would become the world’s largest telecom infrastructure company,while Reliance Communications’ balancesheet.

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RCom and R-Infratel are at an advanced stage of discussions with several domestic and international strategic and financial players to finalise the proposal and the transaction would be announced shortly,a statement said.

The company also said discussions were also continuing for 26 per cent stake sale in RCom as also for possible consolidation or combination options.

The Boards of Directors of RCom and its subsidiary Reliance Infratel today approved in-principle a proposal to restructure ownership of R-Infratel to facilitate efforts of new players to roll out their networks fast and in a cost effective manner.

The announcement comes on the heels of the estranged brothers,Mukesh and Anil,holidaying in a game reserve in South Africa and days after elder Ambani Mukesh announcing nearly USD 5 billion investment in the telecom sector through RIL’s newly acquired subsidiary Infotel that bagged pan-India spectrum for Broadband Wireless Access.

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Commenting on the development,Anil Ambani,Chairman,RCom,said “I am personally looking forward to an era of healthy co-operation and collaboration with existing and new players,especially recent winners of 3G and BWA spectrum.”

Incidentally,RCom also offers broadband services through its limited mobility and could have led to clash of interest in case RIL had sought cooperation for infrastructure support.

On a specific question by analysts whether it could collaborate with Anil Ambani group for infrastructure like optic fibre and towers,RIL had said on Saturday that it could take services from any of the existing players.

The move to create a separate entity would also help RCom to reduce its debts substantially and enhance financial flexibility,Anil Ambani said.

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RCom’s has paid up debt capital of Rs 3,000 crore and a debt-equity ratio of 0.56,which means its debt size is double the size of equity capital,as of March 31,2010.

R-Infratel,in its draft prospectus with regulator Sebi,had disclosed a debt of at least Rs 15,000 crore and sources said this was mainly on account of creating 100,000 towers.