Reliance Communications (RCom) on Thursday announced its intent to divest 5 per cent of its stake in its subsidiary Reliance Telecom Infrastructure Ltd (RTIL) for Rs 1,400 crore to a group of leading financial institutional investors (FIIs) across US, Europe and Asia. The tower business was thus valued at $6.75 billion or Rs 27,000 crore.  

Announcing this at a press conference here, RCom Chairman Anil Ambani said, “Our strategy to create a separate company for infrastructure business has resulted in tremendous unlocking of value for RCom shareholders.” He pointed out that RTIL’s equity valuation of Rs 27,000 crore translates to about Rs 135 per RCom equity share, which is nearly 25 per cent of RCom’s current market price of Rs 565 per share. JPMorgan acted as the exclusive financial advisor on this transaction.

Replying to a question, Mr Ambani said the company was also evaluating a possible initial public offering or strategic equity placements for the tower business.

Business model
Even as its telecom tower business is an independent enterprise engaged in the business of building, owning and operating communication towers and related assets in India, RCom will play the role of ‘core-anchor tenant’, while additional tenants in the form of external wireless operations on RTIL’s towers will provide incremental growth and thereby provide significant operating leverage, he said. RTIL would use a part of the proceeds to roll out 23,000 towers by March 2008 from 13,849 now, making it the largest integrated tower company. “We intend to increase the number of towers to around 40,000 by March 2008 with an investment of Rs 8,000 crore and to 50,000 by March 2009,” Ambani said, adding this would enable the company to cover 90 per cent of India's population.

Post-expansion, RCom will cover 25,000 towns and 600,000 villages.