Anil Ambani plans to up stake in RCom, to sell RInfratel

Reliance Communications (RCom) Chairman Anil Ambani today said the promoters plan to raise their stake in the company to 75 per cent, besides pushing for selling its tower business arm to trim the mounting debt burden of the mobile phone service provider.

"Based on the recent changes made by Securities and Exchange Board of India (Sebi), I think at an opportune time, the promoters will show their deep commitment to the company and to the future prospects of RCom by increasing shareholding from the current 67.9 per cent to the new permissible limits of 75 per cent," he told the AGM here.

He confirmed the company is in talks with several consortia to sell its tower unit, Reliance Infratel.

"We are at an advanced stage of negotiations with a number of consortiums who have expressed great interest in this very valuable asset and I am sure we will be able to move forward expeditiously. When we hopefully conclude the RInfratel transaction, it will be the largest private equity transaction in the country."

Despite posting a loss, the company has declared a modest dividend. At present, it has an interest burden of over Rs679 crore and debt of around Rs32,000 crore on its books.

RInfratel has more than 50,000 cellular towers across 13 circles. Its sale is expected to at least halve RCom's current debt burden, according to a senior official.

"I am committed and the company is committed to ensure our debt levels are substantially reduced. In the first quarter, we had a free cash flow of over Rs500 crore," Ambani said.


These developments come amidst reports that private equity giants Blackstone and Carlyle Group have jointly bid for the tower business, and that their bid is facing a competing bid from another private equity consortium comprising Apax Partners and Advent International.

On shareholders questions about the company's plans for 4G networks, Ambani said "I am surprised that shareholders have asked a number of questions about 4G. Customers are not married to any particular technology and they look for cheaper calls and better quality of service."

"We, as a company, participated in the 3G auctions and we have rolled out one of the largest 3G networks. As the government makes policy clear on advanced technology, we will naturally examine our participation."

He said as the government announces its new telecom policy, the industry will consolidate, with the number of telecom companies coming down to around eight players.

The industrialist also said he foresaw the industry would move forward to higher degrees of co-operation to reduce capital intensity.

"There will be stability of tariff. Customers will have full choice. As the industry consolidates, the days of capital intensity are now behind us. The industry is now moving towards reducing towers in cooperation with each other. As far as our financials are concerned, for the past five years, our company has had large capital expenditure," he said.