Reliance Communications (RCom) on Wednesday announced the signing of an agreement for the acquisition of its nationwide tower assets by affiliates of Canada-based Brookfield Infrastructure partners.
RCom’s telecom towers will be demerged into a separate new company that will be 100 per cent-owned and independently managed by Brookfield Infrastructure, thereby creating the second-largest independent and operator-neutral towers company in India.
RCom said it will receive an upfront cash payment of Rs 11,000 crore ($ 1.6 billion) on completion of the transaction, a move that will help it reduce debt by 70 per cent. The already announced combination of RCom’s wireless business with Aircel, and the monetisation of the tower business, will together reduce RCom’s overall debt by Rs 31,000 crore or nearly 70 per cent, said the company.
The transaction will represent the largest-ever investment by any overseas financial investor in the infrastructure sector in India, and is a strong reflection of the confidence of the international investment community in the long-term growth potential of the Indian economy, according to a statement by RCom.
RCom will also receive Class B non-voting shares in the new tower company, providing 49 per cent future economic upside in the towers business, based on certain conditions.
RCom and Reliance Jio will continue as major long-term tenants of the new tower company, along with other existing third-party telecom operators.
The implementation of spectrum trading and sharing arrangements with Reliance Jio tosecure a nationwide 4G footprint with the deepest penetration and the most efficient 850 MHz band spectrum; the merger of the Indian telecom business of Sistema Shyam Telecom; the combination of the wireless business with Aircel to derive operational and revenue synergies and achieve further industry consolidation; and the monetisation of the towers business in this transaction with Brookfield Infrastructure are all important milestones in RCom’s deleveraging and asset light strategy for future growth.
