Reliance Communications to sell stake in cell tower business

Reliance Communications Ltd, a part of the Dhirubhai Ambani group, has decided to hive off its telecom tower business, known as Reliance Infratel, by selling a major stake.

According to a release issued by RCom to the BSE today, the consideration for the proposal could be in a combination of cash and stock.
Group chairman Anil Ambani said, "I am delighted that this endeavour will greatly benefit Reliance Communications through substantial debt reduction and enhanced financial flexibility."

The board of RCom had on 6 June approved a proposal for 26-per cent stake sale to a strategic investor. RCom currently holds a 95-per cent stake in Reliance Infratel.

The stake sale in the towers business would help RCom reduce some of the Rs33,000 crore of debt on its books, almost half of which can be traced back to Reliance Infratel. This would help RCom realise a better valuation for the stake it sells potential investors.

According to a draft red herring prospectus filed by Reliance Infratel in September, the company has total debt of at least Rs15,000 crore. Media reports over the past few days have suggested that RCom could be in talks with international telecom firms such as the Abu Dhabi-based Emirates Telecommunications Corp, known as Etisalat, South Africa's MTN Group Ltd, and AT&T Inc of the US for a possible stake sale.

Reliance Infratel had planned an initial public offering (IPO) of shares as long ago as in February 2008, but the public issue is yet to hit the market.