A mere five months after buying Aircel's portfolio of 17,500 telecom towers, GTL appears to be hungry for more. The world's largest independent tower company is believed to be in talks with Reliance Infratel, the telecom tower arm of Reliance Communications (RCom), for a strategic partnership.
According to two unrelated persons in knowledge of the talks, the preliminary discussions mentioned transfer of the entire assets and liabilities of Reliance Infratel into another independent entity or a special purpose vehicle. Management control and 26 per cent equity also featured in the talks. However, a deal, if any, may be some time away.
With the sword of the non-compete agreement with Reliance Industries no longer hanging over Anil Dhirubhai Ambani Group (ADAG), a deal of this nature has become easier.
When contacted, GTL Infrastructure Chairman Manoj Tirodkar declined to comment. "As a policy, we don't comment on market speculation," he said. Syed Safawi, RCom's chief executive, said: "These are all speculations doing the rounds in the market." Reliance Infratel CEO Inder Bajaj was not available for comment. RCom's spokesperson responded to Business Standard's email query with: "We categorically deny any such move."
A senior ADAG executive added: "This is not the right time to do anything strategic. Telecom valuations have come down. We have already informed the stock exchanges that we receive different propositions for a strategic stake in RCom We evaluate them, but that doesn't mean we are going ahead and doing a deal."
"And, if we are not doing anything in the parent (RCom) right now, why should we do anything for the arm?...We have not had any discussions whatsoever with GTL for the tower business," he said.
However, the speculations that Sawafi referred to are too loud to ignore. "RCom's talks with GTL have been on for a while now. In fact, they gathered steam right after the Aircel deal. But it's a big transaction, so many loose ends need to be tied up. There are issues of valuation, funding, strategic partners and there may be more than one partner in the transaction due to the scale," said a person who claimed knowledge of the talks but wouldn't be named.
Executives of the two companies, who declined to be identified, indicated that a number of options were being worked out. According one of these options, the entire assets and liabilities of Reliance Infratel will get transferred into another independent entity or a special purpose vehicle (SPV). In that entity, GTL will hold 26 per cent along and may even have management control. A 24% stake will be held by Anil Ambani group entities, with an understanding that their holding will not cross beyond 26 per cent. The existing financial investors of Infratel who are on board since July 2007 George Soros, HSBC, Fortress Capital, New Silk, Galleon, DA Capital and GLG Capital can continue with their 5 per cent holding. For the remaining 45 per cent block, talks are on with a clutch of Gulf based strategic telcos like Saudi Telecom and Etisalat along with their promoters and other financial investors.
Etisalat already has an MoU with RCom for tower sharing. While Saudi Telecom did not respond to Business Standard's email query, Etisalat's official spokesperson said: "This is completely baseless information and we are not considering any such move."
GTL executives said the company wanted to retain majority control and its "independent" tower company credentials in any of its venture. Which is why there is a possibility that instead of RCom, Anil Ambani in his personal capacity or his promoter entities may actually invest in the venture.
Reliance Infratel is a fully-owned subsidiary of RCom and has close to 50,000 towers in its portfolio with a little over 75,000 tenants. It had revenues of Rs 4,934 crore in 2008-09, RDAG Chairman Anil Ambani said at RCom's last AGM. As on March 31, 2009, Reliance Infratel's debt stood at Rs 15,161.3 crore.
