Mumbai: Canadian private equity giant Brookfield has agreed to buy a majority stake of 51% in Anil Ambani-controlled Reliance Communications’ (RCom) mobile phone tower unit for Rs 11,000 crore ($1.7 billion). This will be the largest acquisition in the country’s mobile phone tower segment. Last year, American Tower had bought a 51% stake in Viom Networks for Rs 7,635 crore.
RCom, which has signed a ‘non-binding’ term sheet with Brookfield, will hold the remaining 49% in the tower business, which is currently housed under Reliance Infratel.
RCom owns 96% of Reliance Infratel and the rest is held by institutional investors — Quantum, NSR Partners, Galleon, HSBC, Drawbridge Towers and Investment Partners. All these investors, which had put in $287 million in 2007, will exit Reliance Infratel.
A non-binding term sheet means a contract that doesn’t hold either party to fulfil the terms listed in it. The transaction with Brookfield, said RCom, is subject to customary approvals and certain terms and conditions. There is no certainty that a transaction will result, it said.
Brookfield, the world’s second biggest fund with $250-billion assets under management, entered the scene after RCom’s deal with TPG-Tillman for the tower business collapsed early this year.
RCom said that Toronto-based Brookfield will pay Rs 11,000 crore upfront, which it would use entirely to reduce debt. Currently, RCom, the most leveraged among listed mobile phone carriers, has a debt of Rs 42,000 crore. Another Rs 14,000 crore debt will be knocked off following the company’s merger of its wireless business with Aircel.
RCom, which is advised by Deutsche Bank on the sale of its stake in the tower unit, and Brookfield, which is assisted by Ambit and UBS, said in a statement that they expect considerable growth in the tower business revenues and profits, tracking the expansion of 4G offerings by mobile phone carriers and increase in data consumption.
Brookfield, which set up shop in India in 2009, has invested more than $2 billion in the country’s infrastructure sector and media reports suggest that it intends to put in another $2 billion to double its asset portfolio here.
A few weeks ago, Anil Ambani had said that RCom had “virtually merged” with Reliance Jio, controlled by his older brother Mukesh, and that the two share spectrum, networks and towers.
RCom, post the realignment of its portfolio, will operate the undersea cable and data centre businesses. The company’s shares ended at Rs 48, up 2.3%, on the NSE.