Year after failing to sell telecom towers, RCom is back to sell assets

A little over a year after it failed to sell its telecom towers, talks of Reliance Communications looking to sell its telecom tower assets are back in the market.

On Friday, citing unnamed sources, news agency Reuters reported investment banking arm of Swiss giant UBS has been appointed by Reliance Communications (RCom) to find a buyer for its 50,000 odd towers for around $5 billion or nearly Rs23,000 crore.

It further reported that UBS has reached out to US companies American Tower and Crown Castle International as well as India’s Viom Networks and UAE’s Etisalat.

UBS’ India managing director and chairman, Manisha Girotra, said, “No, we’re not”, when DNA asked if UBS is handling the tower sale.

On Friday, shares of the company hit a new 52-week low at Rs73.95, at which price the market valued the firm at Rs15,263 crore (including the tower business).

RCom’s debt burden is around Rs33,000 crore or more than twice its market capitalisation.

Earlier this week, Syed Safawi, RCom’s president, wireless business, told analysts in an earnings call that interested parties are conducting due diligence on the tower assets and the company expects to close a transaction in the next ‘couple of months’.

To be sure, over the last one year, RCom management has on multiple occasions said that several buyers are interested in its tower assets, but the company has been unable to conclude any transactions.

In June last year, RCom announced an agreement with Manoj Tirodkar’s telecom tower company GTL Infrastructure for sale of its towers, but three months later GTL pulled out from the deal without citing any reasons.

Since then, GTL is dealing with its share of troubles with debt. GTL had pledged shares with lenders as security for the loans taken and with its stock price nosediving, lenders took control of the pledged shares. While ICICI Bank owns 29% in GTL Ltd, another lender IFCI Ltd owns 18% in GTL Infrastructure.

Despite the economic uncertainty globally and the resulting volatility in local markets, Safawi said that buyers’ interest has not been dampened. Reuters mentioned that RCom is looking for $5billion for its tower assets, which analysts think may be on the higher side considering the current market conditions.

One of the weakness in RCom’s tower portfolio is that its towers are not rented by any other telecom companies.

From a buyer’s perspective, such low tenancy factor is a big negative, as rental revenue per tower would be much less than what it would have been if there was higher tenancy on account of other telcos hiring the same towers.