Reliance Communication Ltd on Wednesday announced it has signed a binding agreement with Brookfield Infrastructure for the sale of its tower business. The Anil Ambani-controlled company will receive an upfront payment of Rs 11,000 crore once the transaction is completed.
In the newly acquired tower business, Reliance Communication or RCom will receive class B-non voting shares from Brookfield Infrastructure. RCom will utilise the upfront payment to lower its debt, the company said in a regulatory filing to the BSE.
Following the news, the Reliance Communication stock was trading at Rs 37.35 at around 3:15 p.m. on Wednesday, up 6.56 percent from its previous close on the Bombay Stock Exchange.
"RCom expects significant future value creation from the B Class shares, based on growth in tenancies arising from increasing 4G-roll out by all telecom operators and fast accelerating data consumption," the company said.
The deal is believed to be the largest investment by a foreign investor in infrastructure business since R-Com's telecom towers will be de-merged into a separate new company that will be 100 percent owned and managed by the buyer firm (Brookfield infrastructure).
Ambit, SBI Capital Markets and UBS Securities India are acting as financial advisers and Herbert Smith Freehills LLP and JSA Law are acting as legal advisers to RCOM for the transaction.
In September, RCom announced the merger of its wireless business with Aircel to create a third entity, which would not only combine their market presence but would also significantly reduce its debt.
The two companies, in a joint statement, said RCom and MCB will hold 50 percent stake in the merged entity. They also said the merger would "reduce RCom's debt by Rs. 20,000 crore, or over 40 percent of its total debt, and Aircel's debt by Rs. 4,000 crore," at the end of the 2016-17 financial year.