Reliance Communications sells 5 per cent in tower business for Rs1,400 crore

Mumbai: Reliance Communications Ltd, has agreed to sell 5 per cent of the equity share capital of its fully-owned tower business for Rs1,400 crore. Reliance Telecom Infrastructure Ltd (RTIL) to a group of leading institutional investors across the US, Europe and Asia.

The transaction will result in substantial unlocking of the company''s value with a cash inflow of Rs1,400 crore ($337.5 million), the benefits of which will go to the company and its over 2 million shareholders, the company said in a filing with the Bombay Stock Exchange (BSE).

The capital gains arising out the sale of the 5 per cent stake in RTIL will be amount Rs1,200 crore ($280 million).

The sale values RTIL at Rs27,000 crore ($6.75 billion) or approximately Rs135 per company''s equity share, which is nearly 25 per cent of its current market price of Rs565 per share.

The offering was heavily oversubscribed with a total order book in excess of $2 billion.

Reliance Communications'' residual 95 per cent stake in RTIL is valued at $6.40 billion (Rs26,000 crore), and the company will pursue opportunities for further unlocking of value through an RTIL, IPO and / or strategic sale at an appropriate time.

"We are excited about the tremendous growth potential in the Indian telecom infrastructure business. Our strategy to create a separate company for infrastructure business has resulted in tremendous unlocking of value for RCom shareholders," Anil Dhirubhai Ambani, chairman of the company, said.

"RTIL, as an independent telecom infrastructure provider, has significant growth potential and is on track to become the leading player in India. RTIL will be listed in the near future and provide investors another attractive opportunity to participate in India''s incredible telecom growth," he added.

Reliance Communications will spend Rs8,000 crore in the fiscal year ending March 2008 to add another 23,000 telecom towers to its existing network of around 14,000 towers, Ambani said, adding, RTIL is evaluating a possible initial public offer or further strategic equity sales for the spun-off unit.

To help finance the towers, RTIL would independently raise debt of $1.5 billion to $1.75 billion during 2007/08, Ramesh Venkat, group president of finance and treasury said.
JP Morgan acted as the exclusive financial advisor in the transaction.