RCom to demerge telecom tower biz
Anil Ambani’s Reliance Communications (RCom) is planning to restructure Reliance Infratel. This is the infrastructure arm that operates the 50,000 or so telecom towers owned by the firm.
In its announcement to the exchanges, RCom said that the proposal would result in the creation of ‘the world’s largest independent telecom infrastructure company’. Analysts say the restructuring is likely to be in form of a demerger along with a fund raising. This will help reduce the debt for RCom, which stood at Rs 19,889 crore at the end of FY10.
Existing shareholders of RCom may get shares of two daughter companies — RCom and Reliance Infra-tel. While RCom would provide telecom services, Infratel will own physical infrastructure. RCom’s chairman, Mr Anil Ambani, said that the move “will facilitate efforts of new telecom players to achieve the most extensive and fastest nationwide rollout.”
Reliance Infratel will act as a contractor providing infrastructure to other telecom firms and the broadband business. Sibling Mukesh Ambani’s Reliance Industries, which has just entered the broadband business, could be a client.
According to the announcement, the key features of the proposal will be to reduce the debt and reciept of partial consideration in cash. This indicates a cash infusion of some kind — possibly via an equity investment. Howe-ver, a complete sale is unlikely.
The company has said that RCom and Infratel are both in discussions with several possible investors for the proposal in question. The formal announcement sho-uld come barring ‘unforeseen circumstances’, according to the firm.
Other recent deals in the telecom tower space — Aircel-GTL and Tata-Quippo — valued each tower (including debt) at Rs 55-60 lakh. “Infratel could get a premium to these values as it has a higher number of tenants per tower — Rs 1.75,” says Mr Rahul Jain, an analyst with Angel Broking.
Reliance Infratel had filed its draft prospectus with Sebi in 2009, for an IPO. The company now seems to have shelved that idea in favour of the current move. On June 6, the RCom board had approved a fund raising by selling a stake of up to 26 per cent to investors. The stock price of RCom closed at Rs 179, up 3.7 per cent.
Comments
All we are waiting for price
H.M.G.Samarathunga
17 Jun 2010 - 16:42
All we are waiting for price reduction of mobile tariff. Rcom Sri Lanka , we expect you to become the good service provider.
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