NEW DELHI: Reliance Communications is likely to list its tower arm — Reliance Telecom Infrastructure Ltd (RTIL) — by March. The company which has already offloaded 5% stake in RTIL to outside investors, plans to sell an additional 10% in the company through an IPO.
The valuation of the company as per its 5% equity placement in July to seven institutional investors from the US, Europe and Asia was about Rs 27,000 crore. It is also learnt that the promoters (Reliance Communications) will sell shares and therefore there would not be a fresh issue of equity.
Industry sources told ET that the RCOM was targeting a higher valuation in the range of 20-30% premium during its proposed listing when compared to $6.75 billion in July 2007. They also added that the RTIL would kick off the process for listing by December 2007 by filing the draft red herring prospects with the markets regulator. Being an infrastructure company RTIL needs to sell only 10% through the IPO compared to the 25% minimum listing requirement for other companies.
Reliance Communications (RCOM) chairman Anil Ambani, when announcing the 5% sale of the tower unit, had said that the company would sell additional stake through an IPO or via further placements, but declined to specify a time frame for it.
RCOM’s primary competitor Bharti Airtel, which is currently in the process of transferring its mobile telecom towers and related infrastructure to Bharti Infratel, has already prepared a road map which would allow the company to divest a majority stake in its tower arm in the future.
After the completion of the demerger, Infratel will enter into comprehensive sharing agreements with other service providers while Bharti in time would divest a majority stake and may also go for an IPO, thus making it a completely independent company, Bharti Airtel chairman Sunil Mittal recently told ET.
To sustain the current growth in telecom, India will need to add about 90,000 towers each in FY08 and FY09. At a cost of about Rs 40 lakh per tower, the total investment required annually is Rs 36,000 crore ($10 billion).
Telcos have realised that investments towards setting up towers individually, where the assets are completely owned and used exclusively by single players can no longer be sustained. They are, therefore, hiving off their infrastructure arms as this will make sharing of the active and passive components easier and also help them get return on investments within a reasonable time frame.
Equity dilution in the tower arms also offers a window to bring in both strategic and financial investors on board.
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