
Reliance sells India towers
The Blackstone Group, the Carlyle Group and TPG Capital are all in talks with number two Indian cellular provider Reliance Communications, part of India’s Reliance Anil Dhirubhai Ambani Group, over the spinout of the company’s cellular transmission tower arm, Reliance Infratel, according to Indian sources.
The total value of Reliance’s tower assets is calculated at almost $5.5 billion.
In the complex planned transaction, around 54,000 of Reliance Infratel’s towers will be packaged with 32,000 from leading local tower firm GTL Infrastructure, in a special purpose vehicle. One or more of the selected private equity firms will then be sold a stake in the SPV, which will also subsequently issue shares to both parent firms and seek a public listing. The parent Reliance Group, which currently has around a 95% stake in Reliance Infratel, will reduce its holding to 20-25% as a result, with GTL and the winning private equity player also expected to end up with some 25% each – a stake worth some $1.38 billion.
Despite earlier reports, US cellular tower operator Crown Castle International, previously cited as a possible consortium partner with Blackstone on the deal, appears to be no longer participating. Akhil Gupta, Senior MD and Chairman of Blackstone India, is himself an ex-Reliance staffer, as former CEO for Corporate Development at Reliance Industries and Reliance Infocomm.
The whole transaction may be executed on a part-cash, part-shares basis; as such Reliance Communications can avoid paying capital gains tax. The company is looking to defray over $6 billion in debt, much of it held by Infratel. The parent has long had plans to take Infratel independent, and launched an abortive IPO for the division early in 2010.
India’s cellular tower sector, despite high operating costs due to deficient infrastructure, has strong business prospects. “The tower business is a big deal in India. Indian cellcos need to cut costs where they can to keep their ARPUs low, and tower sharing is a key way to do it,” John Tanner, global technology editor at TelecomAsia, told AVCJ. “Reliance’s desire to bring in a third party sounds like a strategy to compete with other independent tower companies like Indus and Quippo … operators tend to feel more comfortable doing business with an independent tower provider.”
The sector has already attracted investment, with TMT-focused investment firm Quadrangle Group participating in a $300 million investment into Gurgaon-based sector player Tower Vision in February this year. India has also just held spectrum auctions for WiMax and 3G. “Thanks to the recent spectrum auctions, tower demand is about to heat up,” Tanner added.
JPMorgan India is advising Reliance Communications on the deal, with Standard Chartered advising GTL. None of the private equity firms cited were available for comment.
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