Infra Reliance Communications spins off phone towers to GTL Infrastructure, slashing debt
By Erika Kinetz, APSunday, June 27, 2010
Reliance Communications sells phone towers to GTL
MUMBAI, India — India’s GTL Infrastructure Ltd. has agreed to buy the phone towers of Reliance Communications Ltd., creating an independent telecommunications infrastructure company worth 500 billion rupees ($11 billion), Reliance said Sunday.
Reliance Infratel, a subsidiary of Reliance Communications, will spin off its 50,000 telecom towers, adding to GTL’s 32,500 towers, but retain its 124,280-mile (200,000-kilometer) fiber optic network, which the company says is the largest in India.
In exchange, GTL will give Reliance Communications equity and cash and take on some of the company’s burgeoning debt. The company said the details of those ratios are still being worked out and that it expects to close the deal within six months.
Reliance Communications has been courting international operators to sell off a 26 percent stake and reducing the company’s debt will help Reliance win a more attractive valuation.
The debt transfer and cash infusion from GTL will reduce Reliance Communications’ consolidated net debt from 330 billion rupees ($7.1 billion) to 150 billion rupees ($3.2 billion) — roughly the value of a 26 percent stake in the company at Friday’s closing price, a person close to the negotiations said on condition of anonymity because the details have not been finalized.
The person also said each Reliance Communications shareholder would get two to three shares in GTL.
Reliance Communications said the deal gives it “enhanced financial flexibility” as it continues to look for a strategic partner.