American Tower Corporation, private equity firms on Reliance Communications shortlist for Reliance Infratel stake

NEW DELHI: Reliance Communications has shortlisted telecom tower firm American Tower Corporation (ATC) apart from private equity firms Carlyle, Blackstone, Farallon Capital and Tillman for buying up to 100% of its stake in unit Reliance Infratel, news which boosted the Anil Ambani-led company’s shares.

“The formal process for sale of a controlling 51% stake in Reliance Infratel was launched a few weeks back, and has got a very positive response… the company has shortlisted a smaller number of very credible interested parties to progress to the next round of the process,” India’s no. 4 telco told the stock exchanges in a statement after an earnings call on Monday.

While RCom didn’t name any of the shortlisted bidders, it said that it had received indicative non-binding bids from a number of interested buyers. In fact, some of the shortlisted bidders want to buy out RCom’s stake in Reliance Infratel completely. It didn’t specify the bid levels, but ET had reported in June that the initial bids had valued the tower arm at Rs 20,000-24,000 crore, including Rs 8,000 crore of debt.

“The due diligence process has now commenced. Further announcements will be made, as and when appropriate,” the company said, adding that the sale proceeds from the proposed deal would substantially reduce RCOM's overall gross debt during the current financial year through March 31, 2016.

Sources said Bharti Infratel, India’s No. 2 tower firm and a unit of Bharti Airtel, had also put in a bid for RCom’s stake in Reliance Infratel, which owns and operates over 45,000 telecom towers countrywide. However, a Bharti Infratel spokesperson said, “We can confirm we have not put any bid”. Standard Chartered and SBI Capital Markets are running the sale process.

Reliance Infratel is 96% owned by RCom. Minority and institutional investors such as George Soros' Quantum (M), NSR Partners, Galleon, HSBC Daisy Investment (Mauritius), Drawbridge Towers, Investment Partners B (Mauritius) — which invested $287 million in 2007 — own the remainder.

ATC, Blackstone and Farallon Capital didn’t respond to requests for comment while Tillman executives couldn’t be reached. Carlyle said it didn’t have any comment.

RCom’s stock fell initially after posting weak results on Friday after market hours, but pared back losses after the news came out during market hours on Monday to close the day 2.1% higher atRs 62.20 on the Bombay Stock Exchange.

The telco said it is also exploring options including spectrum sharing and trading to optimize value of its spectrum holding, while exclusive talks to merge Sistema JSFC’s Indian business have reached advanced stages. Having laid out capex guidance for this fiscal at Rs 1,800 crore to Rs 2,000 crore, RCom wants to focus on its core telecom business, launch 4G services in the next few quarters and monetise assets to reduce debt. Spectrum trading rules that are expected to come out this month, will open up another option to optimise value of its spectrum holding, RCom Chief Executive Vinod Sawhney said at the earnings call.

“The process to strengthen out balance sheet is underway,” he added. The company had a net debt of Rs 38,595.7 crore at the end of June 30, 2015, which it has been trying to reduce by selling stake in the tower arm and itself over the last several years.

Talking about the Sistema talks, RCom’s wireless business CEO Gurdeep Singh said that the Indian telco is not taking on any liabilities, just assets – that is revenue, spectrum (liberalised) and subscribers. ET had reported in its June 17 edition that Sistema’s India business was being valued at $500 million. RCom’s market cap is currently over Rs 15,000 crore.

Sistema runs its Indian telecom business through Sistema Shyam TeleServices, which offers telecom services under the MTS brand. The company uses CDMA technology in nine of India's 22 service areas. Sistema JSFC could infuse more funds to raise its stake in the new entity, perhaps to as much as 50%, ET had reported previously.