RCom signs pact to sell tower, fibre assets to TPG, Tillman

It may utilise the proceeds of the proposed transaction to pare its debt.

Anil Ambani led Reliance Communications (RCom) agreed on Friday to sell its telecom tower assets and related infrastructure to Tillman Global Holdings, LLC and TPG Asia Inc. (TPG). The transaction, if successful, will be the largest acquisition in the telecom sector in India as the RCom has 45,000 phone towers valued at about Rs. 22,000 crore and optic fibre assets worth another Rs. 8,000 crore, taking the total deal size to Rs. 30,000 crore.

“Under the term sheet, the specified assets are intended to be transferred from Reliance Infratel Ltd. (RITL) on a going concern basis into a separate SPV, to be owned 100 per cent by Tillman and TPG,” RCom said in a statement. Tillman and TPG will also evaluate purchase of the company’s extensive nationwide inter-city and intra-city optic fibre assets, in a separate and independent transaction, it said. RCom will, however, continue as an anchor tenant on the tower assets under a long term pact, as per contours of the deal. With outstanding borrowings of about Rs. 40,000 crore RCom intends to utilise the proceeds of the proposed transaction to pare its debt. After the deal, RCom’s debt will decline to Rs. 10,000 crore, making it one of the least leveraged companies in the country’s telecom industry.

Also, RCom’s interest costs will fall by a significant 85 per cent to Rs. 600 crore a year.

“The parties have entered into an exclusivity agreement valid till January 15, 2016. The proposed transaction is subject to final due diligence, definitive documentation, applicable regulatory and other approvals and certain other terms and conditions,” the company said. “Accordingly, there can be no certainty that a transaction will result. Further announcements will be made at an appropriate stage,” it added. The telecom tower business in India is seeing an increase in demand as telecommunications firms expand high-speed 3G and 4G internet services across the world's second-biggest telecom market by number of users.

RCom shares slid 3 per cent to Rs. 81.05 in a weak Mumbai market on Friday, valuing the company at Rs. 20,173 crore.