MUMBAI (TIP): Reliance Group chairman Anil Ambani is close to signing two, separate deals to deleverage the telecommunications business.
The billionaire industrialist is combining Reliance Communications’ (RCom) wireless business with Aircel, which will make the merged entity a strong player in India, the world’s second largest market after China in terms of mobile phone subscriptions. Ambani is also close to selling RCom’s tower unit to Brookfield Asset Management as he tries to rejig the debt laden telecom business. The two transactions (wireless and tower) will help RCom to reduce its debt from Rs 42,364 crore to Rs 10,000 crore.
The RCom board will meet on September 14 to consider the Brookfield offer, though formal announcement will follow pending documentation work, sources said.
Ambani is keen to clinch the deal with Aircel before the 15-day ‘Shradh’ period, considered inauspicious to start new projects, which begins on September 16. The deal also needs to be wrapped up well before the upcoming spectrum auctions, as mergers and acquisitions are prohibited from the date of invitation for application till the end of the auction.
Brookfield is set to acquire controlling interest in the tower unit Reliance Infratel valued at around $2.5 billion, or Rs 16,000 crore. RCom will retain a minority economic interest going forward. When contacted, RCom declined to comment. Repeated text messages and calls to Brookfield officials went unanswered.
RCom will separate the wireless business and combine it with Aircel with promoters from both sides owning equal stake in the combined entity. Aircel’s shareholders are Malaysia’s Maxis Communications (holds 74%) and Prathap Reddy family’s (of Apollo Hospitals) investment arm Sindya Securities (owns 26%). Some months ago, RCom acquired Russian conglomerate Sistema’s local wireless business, operating under the MTS brand, and as part of the deal, Sistema owns 10% of RCom.
The sale of the tower unit to Brookfield will be inked after the signing of the Aircel deal as there will be more clarity to the acquirer with regards to RCom’s mobile phone masts portfolio, said a source familiar with the matter.
The tower portfolio will slightly change after the Aircel deal as some duplication and redundancies will kick in. The overlaps, which will be identified by Ericsson, is estimated to be 1,500 towers, said the source. Currently, RCOM has 43,500 towers. Aircel, on the other hand, operates on rented infrastructure. Brookfield, added the person, has already completed the due-diligence. The Canadian investor stepped into the picture after the Tillman-TPG consortium walked away from the RCOM tower deal.If Brookfield acquires the tower business, it will be its first purchase in the telecom sector. The PE giant is also in the race to buy Ambani’s road projects portfolio housed under Reliance Infrastructure. The source further said that the optic fibre business is excluded from the deal with Brookfield.