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Suitors back for Anil tower arm

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By OUR SPECIAL CORRESPONDENT
  • Published 1.06.11
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Mumbai, May 31: The telecom tower assets of the Anil Ambani group are back on the dealmakers’ radar.

Reliance Communications (R-Com) today said it had received several offers to acquire as much as 95 per cent in Reliance Infratel Ltd, the company that owns 50,000 telecom towers that are spread across the country.

The announcement came a day after mobile service provider R-Com reported a 65 per cent decline in fourth quarter net profits at Rs 168.6 crore in the period ended March 31. While R-Com had reported a loss on a standalone basis, its full-year profits on a consolidated basis plunged 71 per cent to Rs 1,346 crore.

Market mavens felt that the disclosure of renewed talks on the sale of its telecom tower assets was made to soothe investor concerns over R-Com’s poor performance. The R-Com stock rose 2.17 per cent to close at Rs 89.40 on the BSE and seemed to validate the market’s cynical view on the sudden disclosure.

R-Com said its board was informed that several indicative offers had been received for the acquisition of a controlling interest in Reliance Infratel.

“The board noted that, based on the indicative offers, completion of such a transaction would facilitate R-Com’s stated objectives of achieving a substantial reduction of its overall debt position, and staying well within its target long-term leverage ratios. Accordingly, the board has approved taking the process to the next stage of detailed due diligence, with a view to completing such a potential transaction at the earliest,” the company said.

For the year ended March 31, 2011, net debt at R-Com stood at Rs 32,048 crore.

Analysts had said the huge debt on the books was one of the reasons why R-Com had reported sharply lower profits during the fourth quarter.

Failed deal

This is not the first time that the Anil Ambani group company has tried to unlock value by selling a stake in Reliance Infratel. Last June, R-Com had announced that it was demerging the tower business to GTL Infrastructure in a Rs 50,000-crore deal.

The deal fell apart in September after serious differences arose between the two sides over the valuation of the tower assets.

In the past, it had been rumoured that American Tower Company, which has a portfolio of 37,000 wireless communication sites in the US, Brazil, Chile, Colombia, India, Mexico, Peru and South Africa and Crown Castle were interested in the Reliance Infratel assets. It was also speculated at one stage that Mukesh Ambani might also be interested in the tower business after his acquisition last year of Infotel Broadband.

At one time, R-Com had also mulled a 26 per cent stake sale to strategic and/or private equity investors.

Telecom tower deals have been profitable over the past two years. But a telecom analyst said with several firms, including Bharti Airtel reporting poor results this year because of severe competition-inspired crimp in margins, it would be interesting to see whether the big buck deals could still be struck in this space.