Boston-based American Tower, the world's largest telecom infrastructure company, is set to pick up a 20 per cent stake in Reliance Communications Ltd's (RCL) tower business which is now being hived off as an independent entity.
American Tower will invest $1 billion for its minority stake, industry sources say. As a precursor to the transaction, shareholders of RCL on Sunday approved the demerger of the tower and infrastructure business into a wholly-owned arm called Reliance Telecom Infrastructure Limited (RTIL).
RCL's tower subsidiary would fetch a valuation in the range of $4-5 billion, if valuations of global companies like American Tower are used as a benchmark, according to telecom analysts.
"The growing potential of Indian market can also prop up the valuation,” said a Mumbai-based analyst.
Rising valuations have prompted Reliance's rival Bharti Airtel to hive off its mobile tower and infrastructure business so that it can focus on services.
According to a recent consultation paper by TRAI on infrastructure sharing, passive infrastructure contributes as much as 60 per cent of the total cost of networks with active electronics comprise the remaining 40 per cent.