Reliance Communications has signed a non-binding agreement to sell a 51% stake in its tower unit to Canadian Brookfield Infrastructure Group.
The deal includes an upfront cash payment of INR110 billion ($1.7 billion), with RCom confirming that it intends to use the income “solely to reduce its debts”. The companies have stated that the Indian operator “will also enjoy 49 per cent future economic upside from the towers business, based on certain conditions.”
Assets will be transferred from Reliance Infratel to a special purpose company owned by Brookfield. RCom “will continue as an anchor tenant on the tower assets” as part of a long-term agreement. The deal requires various customary approvals along with other terms and conditions.
RCom is India’s fourth largest operator, and its net debt is over five times its operating profit at $6.3 billion. The operator’s billionaire owner Anil Ambani has professed his goal of slashing the firm’s debt by 75% within the next year.
Brookfield and RCom stated that they “expect considerable growth in tenancies based on increasing 4G offerings by all operators, and the fast accelerating trends in data consumption, which are expected to contribute to significant growth in revenues and profitability for the towers business in the future”, adding that consolidation of tower companies in India would “further enhance growth and value creation in the future.”
Last year, RCom attempted to sell its tower assets to a consortium led by TPG Capital Management, signing a non-binding agreement. However, the deal didn’t come to pass.