Reliance Communications Ltd., India’s second-largest wireless carrier, rose to a five-month high in Mumbai trading after saying it will sell stakes in its mobile-phone tower unit and use the proceeds to pay debt.
The company, controlled by billionaire Anil Ambani, is in “advanced talks” with local and overseas companies for a cash and stock transaction for part of Reliance Infratel Ltd., according to an e-mailed statement yesterday.
Reliance Communications, which paid 85.9 billion rupees ($1.8 billion) for permits to offer high-speed wireless phone services last month, is raising funds to cut net debt that stood at 199 billion rupees as of March 31. The company said on June 6 it will also sell a 26 percent stake in itself to a strategic or private equity buyer to help pay debt and upgrade networks.
“The total portfolio for Reliance’s nearly 50,000 towers would be close to 250 billion rupees,” said Rahul Jain, an analyst with Angel Broking Ltd. Selling a stake in the unit, which builds, owns and operates telecommunication towers, will help boost the Mumbai-based company’s valuation, Jain said.
Shares in Reliance Communications rose 4.3 percent to 186.80 rupees, its highest closing price since Jan. 20. India’s benchmark Sensex index rose 0.4 percent.
Reliance Communications’ net debt at the end of March was down from 226 billion rupees a year earlier. The company hasn’t said how much debt it used to fund the purchase of wireless phone permits in May.
Likely buyers for its Reliance Infratel unit are Anil’s brother Mukesh Ambani’s Reliance Industries Ltd., and U.S.-based Crown Castle International Corp., Jain said.
Manoj Warrier, a spokesman for Reliance Industries, which entered India’s crowded telecom field this month by agreeing to pay 48 billion rupees for control of Infotel Broadband Services Ltd., wasn’t immediately available for comment.
Calls to the office of Jay Brown, chief financial officer of Crown Castle International in Houston, weren’t immediately returned.
GTL Infrastructure Ltd., India’s largest independent operator of mobile-phone towers, is in talks for a possible deal with Reliance Communications to buy Reliance Infratel, CNBC TV-18 television channel reported yesterday, citing people it didn’t identify.
Shares of GTL rose as much as 5.5 percent to 42 rupees in Mumbai trading today before closing at 40.55 rupees.
GTL doesn’t comment on “speculation,” spokesman Vikas Arora said, when asked about the report.
Reliance Communications’ proposed sale of a stake in its phone tower unit comes as revenue from the nation’s mobile-phone services industry is poised to fall 22 percent this year after declining 25 percent in 2009, according to Bank of America Corp.’s Merrill Lynch unit.
Price competition has cut call rates to less than one U.S. cent a minute, it said. Only Pakistan and Bangladesh have lower average revenue per customer than India, the world’s second-largest mobile phone market, Merrill Lynch said.
If Reliance Communications “is able to sell a 50-odd percent stake in the company, it may get incremental cash of 100 billion to 120 billion rupees,” which could help it pay down debt and fund its new 3G network, Angel Broking’s Jain said. “Things are tough for the industry still,” he said.
‘Substantial Future Demand’
Reliance Communications’ board predicts “likely substantial future demand for telecom infrastructure across the country,” according to the June 14 statement. It attributed the growing demand to new entrants to the industry.
Reliance Infratel has assets including 50,000 towers, and a fiber-optic network that reaches 25,000 towns and 600,000 villages. Current customers of Reliance Infratel include Aircel Ltd., Idea Cellular Ltd., and the Indian unit of Newbury, England based Vodafone Group Plc.
Regarding a separate plan to sell shares in Reliance Communications, the company is seeking an “appropriate premium to the prevailing market price” and will “examine and pursue other appropriate strategic combination or consolidation opportunities,” Mumbai-based Reliance said in an e-mailed statement on June 6.
While the Indian company didn’t name possible bidders, Emirates Telecommunications Corp., known as Etisalat, on June 7 said Reliance Communications is among opportunities it is “studying” in India.
GTL also agreed in January to buy 17,500 transmission sites from Aircel Ltd. for 84 billion rupees to help it double its network in India. American Tower Corp.’s Indian subsidiary in February agreed to acquire the Essar Group’s tower unit for about $430 million.