India’s Reliance Communications is reportedly nearing an agreement to sell its stake in Reliance Infratel to private equity in a deal valuing the tower unit at Rs220-Rs230bn (US$3.3bn-US$3.5bn). The potential deal would come as the local tower sector benefits from a boom in data usage and regulatory reforms.
India’s Reliance Communications (NSE:RCOM) is reportedly nearing an agreement to sell its stake in Reliance Infratel to private equity in a deal valuing the tower unit at Rs220-Rs230bn (US$3.3bn-US$3.5bn).
RCom, the country’s fourth-largest telco with some 111 million customers, is likely to sell its entire 96% stake in Infratel, the Economic Times cited people familiar saying. An announcement is expected within the next few days – potentially this week. A Reuters report cited sources saying they buyer is a consortium of private equity firms.
RCom chairman Anil Ambani said in late September that the company expected to agree a sale of a stake in Infratel within the next couple of months.
An earlier local media report had said the four shortlisted bidders for the sale all hailed from the US: American Tower and private equity firms Carlyle, Farallon Capital and Tillman Capital. According to the report, two of the bidders wanted RCom’s entire stake in Infratel, while the others wanted a 51% stake.
The sale would help RCom, advised on the deal by Standard Chartered and SBI Capital Markets, to pare down debt, which totalled Rs399bn (US$6bn) at the end of September, as well as to focus on its core telecoms business.
The transaction would come about a month after the operator agreed to acquire number nine cellco Sistema Shyam TeleServices (SSTL), which trades as MTS India, for an undisclosed sum. The deal will see RCom acquire 9 million customers, about Rs15bn (US$226m) in annual revenues and 4G-suitable spectrum.
Competition between India’s largest telcos is heating up as they prepare to roll out and expand 4G services and brace themselves for the arrival next spring of upstart Reliance Jio, part of Ambani’s brother and sometime rival Mukesh’s Reliance Communications (RCom).
Analysys Mason partner head for India and South Asia, Rohan Dhamija, said he would view the deal as positive for both RCom and the private equity buyer(s).
On the buy side, he said it is a relatively opportune time to enter the Indian tower sector given the data boom, the fact regulatory overhang is being reduced and that some consolidation has already taken place. American Tower reached a long-anticipated agreement to acquire a 51% stake in Viom Networks for Rs76bn (US$1.2bn) in October and other telcos are rumoured to be looking at tower sales.
However, Dhamija noted that the government’s recent approval of spectrum trading means more bandwidth will be available to the leading cellcos, potentially leading to “soft consolidation”. This would be slightly negative for the towercos as it would reduce their number of tenancies. At present, however, many telcos are locked into 10 to 15-year contracts with towercos.
