RCom to use $1.6 b from Brookfield deal to pare debt

Reliance Communications, in its bid to pare debt, will sell 51 per cent stake in its tower unit Reliance Infratel to global alternative asset manager Brookfield Infrastructure Group for ₹11,000 crore ($1.6 billion). RCom, the company controlled by billionaire Anil Ambani, intends to monetise the remaining 49 per cent stake later.

The deal, which is biggest foreign direct investment in the infrastructure space, will also result in creating the second-largest independent tower company in the country. RCom and new entrant Reliance Jio Infocomm will continue as major long-term tenants of the new tower company, along with other telecom operators, RCom said in a statement.

Ambit, SBI Capital Markets and UBS Securities India were the financial advisors and HerbertSmithFreehills and JSA Law were legal advisors to RCom. The transaction is subject to regulatory and other requisite approvals, it added.

The deal follows an October 14 agreement, wherein RCom and Brookfield Infrastructure had signed a non-binding agreement for tower sale. According to sources, RCom will use the proceeds solely to reduce its debt of about ₹42,000 crore. This deal, coupled with its earlier announced plan to combine its wireless business with that of Aircel’s, will help the company reduce its debt by about 60 per cent to ₹17,000 crore.

The Mumbai-headquartered company will continue to retain a 50 per cent stake in combined wireless business (along with Aircel), 49 per cent in towers, retain 100 per cent in Indian enterprise business, data centres, optical fibre and global submarine cable business among others.

The company also had plans to monetise its real estate to raise another ₹5,000 crore, and reduce overall debt to ₹12,000 crore. The Brookfield deal is the latest in the array of initiatives RCom took to future proof its business. Last year, the company had entered into a three-way merger of the Indian telecom business of Sistema Shyam Telecom Ltd and wireless business of Aircel, and spectrum sharing and trading agreements with RJio.

Earlier, RCom was in talks to sell its tower assets to private equity firms TPG and Tillman Global. Separately, the two PE firms are also evaluating RCom’s nationwide inter- and intra-city optical fibre assets.

Shares in RCom closed up 6.85 per cent at ₹37.45, while the main BSE index fell 0.25 per cent on Wednesday.