RCom to sell stake in tower firm, promoters to hike stake to 75%
27 Sep 2011
In an attempt to reduce its debt, Reliance Communications (RCom) is looking at selling stake in its tower firm Reliance Infratel and is in advanced stages of discussions with a number of consortiums.
The telecom operators' promoters are also looking at increasing their stake in RCom to about 75 per cent at an "opportune" time.
"I am committed and the company is committed, we will ensure that our debt levels are substantially reduced and in the quest of that reduction, we are looking at a transformational transaction in the form and shape of Reliance Infratel," chairman Anil Ambani told shareholders at the company's annual general meeting.
"This is one of the largest tower companies in India, and we are at an advanced stage of negotiations with a number of consortiums who have expressed interest in this very valuable asset," he said, without naming the consortiums.
"When we hopefully conclude the Reliance Infratel transaction, it will be the largest private equity transaction in the history of this country," he said, adding, so it will naturally take its time.
According to earlier media reports, RCom was burdened with a debt of over $7 billion and was looking at selling about 95 per cent stake in Reliance Infratel. The company was reported to have hired UBS for the deal.
However, Ambani, India's eighth richest man according to Forbes, did not state how much he intends to sell or on the appointment of UBS.
RCom's plans to float an initial public offering for its tower unit and a attempted merger with GTL Infrastrcutre also did not take off.
The firm had reported a 37 per cent fall in June quarter net profit, impacted by forex losses and higher interest costs.
The Anil Ambani group company posted net profit of Rs157 crore for the quarter ended 30 June 2011, compared with Rs250 crore recorded during the same period a year ago. Its total income fell to Rs4,940 crore during the quarter under review from Rs5,109 crore posted during the same period a year ago, it said in a stock exchange notice.
This is the eighth consecutive fall in net profits for the company. RCom has had over 143 million wireless connections as on 30 June 2011, compared with Bharti Airtel's 169 million and Vodafone's 142 million accounts.
Ambani also mentioned that RCom's founders would look at raising their stake in the company to 75 per cent.
"I think at an opportune time, the promoters will show their commitment to the ongoing and future prospects of RCom, and enhance their own holdings from the currently, roughly about 67 per cent to the new permissible limits of 75 per cent," Ambani said.
The promoters will hike their stake in line the new Securities and Exchange Board of India regulations, he said.
"The last capital intensity, after the 3G auctions, is behind us," he said, the company had a free cas flow of more than Rs 500 crore in the first quarter.
"I am confident that Reliance Communications will perform exceeding well in the years to come," he added.
