Anil Ambani-led Reliance Communications (RCom) has reached a preliminary agreement to sell its telecom tower business to buyout firm TPG Asia and Tillman Global Holdings for about Rs 30,000 crore, in a deal ranked as one of the largest in the Indian telecom sector.
Reliance Communications owns 96% equity stake in the telecom and related infrastructure business, Reliance Infratel.
Reliance Infratel owns 43,500 mobile towers across the country.
While RCom didn’t disclose the deal size, people familiar with the development said the proceeds of the transaction would be used to reduce the company’s debt to Rs 10,000 crore, from the current Rs 40,000 crore. This would reduce the finance costs of the heavily-leveraged RCom by about 85%
RCom shares ended down 3.1% on the Bombay Stock Exchange on Friday.
“Under the term sheet signed on Friday, the specified assets are intended to be transferred from Reliance Infratel on a going concern basis into a similar SPV (special purpose vehicle) to be owned 100% by Tillman and TPG,” RCom said in a statement.
The parties entered into an exclusivity agreement, which will be valid till January 15, 2016. The proposed transaction is also subject to a final due diligence, definitive documentation, regulatory and other approvals, the company said.
A term sheet is typically a preliminary agreement and may not result in a deal.
Tillman and TPG will also evaluate purchase of RCom’s extensive nationwide inter-city and intra-city optic fibre assets in a separate and independent transaction, the statement said.
RCom said it will remain as an anchor tenant on the tower assets under a long-term agreement for its telecom business.
The transaction could be a significant development for RCom as it has been trying to monetise the tower assets since 2007-08 . The debt coming down will add at least Rs 1,000 crore to the company’s EBITDA (earnings before interest taxes depreciation and amortisation), said Sudip Bandyopadhyay, market analyst
The tower business in India is seeing an increase in demand as operators expand high-speed 3G and 4G Internet services across the country. In October, American Tower Corp agreed to buy a 51% controlling stake in Viom Networks for Rs 7,600 crore.