Anil Ambani owned- Reliance Communications has announced to sell 51% stake in its tower unit to Canada-based Brookfield Infrastructure Group for an upfront cash payment of Rs 11,000 crore.
The company plans to use the entire sale proceeds to cut debt.
Sources though said R-Com will retain 49% stake in the business, which will be monetised later as it expects considerable value creation in the next couple of years.
As part of the non-binding term sheet signed by R-Com with Brookfield, the specified assets are intended to be transferred from Reliance Infratel on a going concern basis into a separate SPV, to be owned by Brookfield. R-Com will continue as an anchor tenant on the tower assets under a long-term MSA (master service agreement) for its integrated telecommunications business.
“R-Com 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 company said in a statement.
The proposed transaction is subject to definitive documentation and customary approvals, the statement added.
The deal is one of the largest ever FDI coming into India in the infrastructure sector. The deal will help R-Com cut down its debt substantially. The Anil Ambani firm had already announced merger of its wireless business with Aircel that will reduce the debt by Rs 14,000 crore and along with this tower deal, the company’s debt is likely to be reduced to Rs 17,000 crore from the current Rs 42,000 crore.
The debt will be reduced by 60 per cent after these two deals. Also, the company plans to monetise its real estate to raise another Rs 5,000 crore, and reduce overall debt from Rs 17,000 crore to Rs 12,000 crore.
After closure of the two transactions, R-Com will retain 50 per cent stake in combined wireless business, and 49 per cent stake in tower business. Apart from that, it will have 100 per cent control of its Indian enterprise business, data centres, optic fibre, global submarine cables, GCX, etc.
Sources further said that as R-Com does not require any major spend for spectrum or Capex in the future, as post the merger with SSTL 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.
The company will thus emerge as one of the stronger telecom operators in the country post the strategic transactions that are under implementation.