Reliance Communications Signs Preliminary Pact to Sell Mobile Towers

Reliance Communications Ltd, India's fourth-biggest wireless telecommunications carrier, has signed a non-binding pact to sell its mobile phone masts business to a group of companies led by buyout firm TPG Capital Management LP.

The sale is key for Reliance Communications, the most-leveraged Indian telecoms carrier with $5.8 billion (roughly Rs. 38,799 crores) in net debt as of the end of March. Past efforts to sell a stake in the unit or take it public failed to go through.

Both sides have entered into an exclusive agreement valid until Jan. 15, on a deal subject to final due diligence and regulatory approvals, Reliance Communications said on Friday.

It said there was no certainty a deal would be concluded, adding that the company, headed by billionaire Anil Ambani, planned to use the proceeds of the planned deal to reduce debt.

Financial details of the deal were not disclosed, though sources told Reuters last month Reliance expected an enterprise value of about 230 billion rupees ($3.5 billion) for the unit, which has a portfolio of about 45,000 masts.

One of the sources said the equity value of the business could be around $2 billion (roughly Rs. 13,379 crores).

Reliance Communications shares ended 3.2 percent lower at 80.95 rupees after the announcement. Still, the shares are up about a third since end-August, after a rally fuelled by expectations of the tower deal.

"Everybody knew that the deal is happening, but when the deal is happening (and) if you're not aware of the value then that gives you a bit of disappointment," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.

"I don't know if the actual deal value is much less than the market expectation."

Under the deal terms, TPG and Tillman Global Holdings LLC, a US firm that invests in telecoms and energy infrastructure businesses, will buy the new arm that will be created with the transfer of Reliance Communications' towers and related assets.

Mobile mast operators in India are seeing an increase in demand as carriers expand high-speed 3G and 4G Internet services across the world's second-biggest telecommunications market by number of users.

In October, American Tower Corp agreed to buy a 51 percent controlling stake in Indian mobile mast operator Viom Networks for 76 billion rupees.

© Thomson Reuters 2015