RCOM sells 5% stake in its tower arm for $338 m

Reliance Communications has sold 5% stake in its tower arm, Reliance Telecom Infrastructure (RTIL), to seven institutional investors for $337.5 million (Rs 1,400 crore). The company did not disclose the names of investors, who are believed to be largely PE players from the US, Europe and Asia.

The stake sale translates into an equity valuation of Rs 27,000 crore for RTIL, which now has 14,000 towers. The valuation stands at Rs 135 per share for RCOM’s every share outstanding, RCOM chairman Anil Ambani said at a press conference in Mumbai on Thursday. RCOM’s capital gains from the transaction will be Rs 1,200 crore.

“The transaction will result in a cash inflow of Rs 1,400 crore, the benefits of which will flow to the company and its shareholders,” said Mr Ambani. There is no lock-in period for investors and a subsidiary of RCOM, through which the transaction was executed, has the first right of refusal.

On further unlocking value, he said RCOM was being approached by a number of strategic as well as financial investors. “Hopefully, it’ll be at a higher price. We have established a benchmark valuation at Rs 27,000 crore. We clearly value further unlocking through IPO or strategic sale as we progress,” he said, refusing to divulge the stake RCOM will dilute in the future or the timing of an IPO. RTIL will be listed on the domestic bourses. JP Morgan was the advisor to RCOM on this transaction.

Mr Ambani said 23,000 new towers will be built in the next six months to take the aggregate tower number to 40,000 by March 2008. He announced Rs 8,000-crore capex for the current fiscal for hiking the tower count. RCOM will be the core tenant on the towers and the company hopes to have one lakh tenancy slots by this fiscal-end. Currently, 14,000 towers have 30,000 tenancy slots. “Of the total, 60% tenancy will be by us while the rest will be outsiders. RCOM has signed a 10-year contract for use of towers,” he added.