Reliance Communications is selling Reliance Infratel, its telecom tower arm, to GTL Infrastructure, a standalone telecom tower operator. The enterprise value of GTL Infra after the merger will be Rs 50,000 crore. Post transaction, GTL will have over 80,000 towers and will be the largest independent telecom tower operator in the world.
The management control of the merged entity will be with GTL promoters. GTL will pay for Infratel in a combination of cash and stock, details for which will be given out later. R-Com will get some cash for its stake in Infratel. In addition, its shareholders will get shares of GTL Infra.
The deal comes a fortnight after R-Com had announced it is restructuring its tower arm to raise money. The deal will help the company cut down debt significantly — Rs 18,000 crore according to some reports. R-Com had a total debt of Rs 19,889 crore at the end of FY10. The company had raised debt to pay Rs 8,585 crore for the spectrum it had won in the 3G auction. Lower debt will make it easier for the company to fund its expenditure for 3G services rollout.
The purchase will help GTL strengthen its position as an indpendent telecom tower firm. This is the second major purchase by GTL in the past six months.
It had purchased 17,500 towers from Aircel at a total valuation of Rs 8,400 crore earlier in January this year. GTL will have a network of 80,000+ towers and will be the largest independent tower operator in India by a very wide margin.
Based on recent transactions in the telecom space, tower deals have been finalised at Rs 50-60 lakh/tower. Reliance Infratel, which has 50,000 towers, would have an enterprise value (market capitalisation + debt) of Rs 30,000 crore by this metric. However, Infratel may get a premium because it has, on an average, 1.75 tenants for each of its towers. This is higher than the industry average.
Media reports suggest that Mr Anil Ambani will hold a stake of 25 per cent in GTL post the transaction while the promoters of GTL will have a 33 per cent stake.