Indian operator Reliance Communications (RCom) agreed to sell to Brookfield Infrastructure its nationwide tower assets. RCom will receive a cash payment of INR 110 billion (approximately USD 1.6 billion) on completion of the transaction. RCom will also receive Class B non-voting shares in the new tower company, providing 49 percent future economic upside in the towers business, based on certain conditions.
RCom said it expects significant future value creation from the B Class shares, based on growth in tenancies arising from increasing 4G roll-out by all telecom operators and fast accelerating data consumption.
RCom’s telecom towers will be demerged into a separate, new company that will be 100 percent owned and independently managed by Brookfield Infrastructure, thereby creating the second largest operator-neutral towers company in India. RCom will have certain information and other rights, but will not be involved directly or indirectly in the management and operations of the new company.
RCom and Reliance Jio will continue as major long term tenants of the new tower company, along with other existing third party telecom operators. RCcom plans to use the cash payment of INR 110 billion to reduce its debt.
The recent combination of RCom’s wireless business with Aircel, and the monetization of the tower business, will together reduce RCom’s overall debt by INR 310 billion (approximately USD 4.6 billion), or nearly 70 percent of its existing debt.
RCom will continue to own a 50 percent stake in the wireless business combination with Aircel and the 49 percent future economic upside in the towers business, and said it plans to monetise these assets at an appropriate time in the future to further substantially reduce its debt.
The transaction is subject to applicable approvals, including shareholder and regulatory approvals, lenders’ consents etc.
