RCom signs definitive agreement to sell towers

Reliance Communications Ltd (Rcom), which had put its tower assets on sale, has signed binding agreements with Brookfield Infrastructure Infrastructure Partners and its institutional partners for the sale of the infrastructure. The Anil Ambani group company will get an upfront payment of Rs 11,000 crore ($1.6 billion) on completion of the transaction.

Rcom's telecom towers will be demerged into a separate company, which will be a wholly-owned and independently managed by Brookfield Infrastructure. This will be the second-largest independent and operator-neutral Towers company in India. RCom will enjoy certain information and other rights, but will not be involved directly or indirectly in the management and operations of the new company.

The transaction will be the largest-ever investment by any overseas financial investor in the infrastructure sector in India. The transaction is subject to regulatory and other applicable approvals, Rcom said in a statement.

Ambit, SBI Capital Markets and UBS Securities India were financial advisers, while Smith Freehills LLP and JSA Law were legal advisers to Rcom on the transaction.

Rcom will also receive Class B non-voting shares in the new tower company, providing 49 per cent future economic upside in towers business, based on certain conditions. Rcom expects significant future value creation from the B Class shares, based on growth in tenancies arising from increasing 4G rollout by all telecom operators and fast accelerating data consumption.

RCom and Reliance Jio Infocomm will continue as major long term tenants of the new tower company, along with other existing third party telecom operators.

RCom will utilise the upfront cash payment of Rs 11,000 crore ($1.6 billion) solely to reduce its debt. The already announced combination of Rcom's wireless business with Aircel, and the monetisation of the Tower business, will together reduce Rcom's overall debt by Rs 31,000 crore ($4.6 billion), or nearly 70 per cent of existing debt.

Rcom will continue to hold a 50 per cent stake in the wireless business combination with Aircel and the 49 per cent future economic upside in the towers business. The company intends to monetise these assets at an appropriate time in the future to further substantially reduce its overall debt.