Reliance Communications (RCom) on Wednesday signed binding agreements with Canada-based Brookfield Infrastructure and institutional partners to sell its tower business for an upfront cash payment of Rs 11,000 crore. RCom will "also receive B Class non-voting shares in the tower company, providing 49 per cent future economic upside from the business based on certain conditions", the company said in a statement.
RCom will utilise the cash proceeds solely to reduce debt, it said.
The tower business will be demerged into a separate company, to be 100 per cent owned and independently managed by Brookfield Infrastructure. The deal represents the largest-ever investment by an overseas financial investor in the infrastructure sector in India.
The Anil Ambani-promoted RCom, and brother Mukesh Ambani's 4G telecom venture Reliance Jio will continue as major long-term tenants (of the tower company).
"RCom expects significant future value creation based on growth in tenancies from accelerating data consumption," the statement added. Giving details, RCom said the combination of its wireless business with Aircel and monetisation of tower operations will together reduce the company's debt by Rs 31,000 crore (USD 4.6 billion), or nearly 70 per cent.
"RCom will continue to hold 50 per cent stake in Aircel JV and 49 per cent upside in tower business to be monetised at an appropriate time to further reduce debt significantly," it added.
Reliance Communications further said that monetisation of towers is a "major step" forward in its deleveraging and asset light strategy for future growth transactions, subject to stipulated approvals.
It may be recalled that in mid-October, RCom had announced the signing of a non-binding term sheet with Brookfield Infrastructure Group for sale of the nationwide tower assets and related infrastructure.
On Tuesday, in fact, Fitch Ratings had downgraded credit rating of Reliance Communications saying that it feels that ongoing joint venture plan of the company with Aircel and proposal to sell stake in its mobile tower arm will be negative for creditors.