Telecom Lead Asia: RIL-owned Infotel Broadband is likely to buy stake in Reliance Infratel, a part of Reliance Communications.
Reliance Infratel that operates telecom towers has been looking for a potential buyer to unlock value.
Mukesh Ambani and Anil Ambani, promoters of RIL and Rcom, respectively, are in the advanced discussion stage for a three structure deal, Economic Times reported. Both parties have not finalized the deal.
RIL, India’s largest private firm, re-entered the telecom business in June 2010 after it bought 95 percent stahe in Nahata-owned Infotel Broadband for Rs 4,800 crore.
RIL Chairman and Managing Director Mukesh Ambani was forced to hand over the telecom business to his brother Anil Ambani when they broke up the Reliance empire in 2005.
The following are the main components of the deal:
RIL and Reliance Infratel will sign a leasing arrangement valued at Rs 8,500-10,000 crore over a 10-year period. The deal will enable RIL’s 4G arm to use nearly 50,000 towers of Reliance Infratel.
RIL’s Infotel may also buy 15-25 percent stake in Reliance Infratel.
The stake sale is being negotiated at an enterprise value of $3.5-4 billion for the company. The valuation would mean cash inflow of Rs 2,850-5,300 crore for RCom. At the end of the quarter September, RCom’s debt stood at about Rs 36,700 crore. The debt is now 5.6 times its Ebitda. Offloading stake in Reliance Infratel is vital for the financial health of Reliance Communications.
Reliance Communication’s wireless business said on Thursday that the company is in negotiations with three telecom operators for tower-leasing deals.
Reliance Infratel is planning a public listing towards the end of this year to offload 25 percent stake. Infotel Broadband will dilute its stake to 5-10 percent, leaving 55 percent with RCOM and the rest with strategic investors, which currently hold 5 percent.
RIL is planning to launch 4G services in India in 2013 after signing BWA spectrum license agreement in 2010. It is in talks with Samsung and other telecom vendors to procure 4G / LTE equipments.
Recently, CLSA, in its research report, said several catalysts could help Reliance Communications to unlock value, including an inevitable tower/infrastructure-sharing deal with Reliance Industries for its 4G rollout.
“Reliance Industries is the only pan-India 4G / LTE spectrum owner. Service rollout is reported to be in 2013 and its best option remains to lease towers from Reliance Infratel,” said CLSA in a report.
