RELIANCE Communications (RCOM) plans to sell another 5% stake in its wireless tower business—Reliance Telecom Infrastructure Ltd (RTIL)—in the second such deal this year. JP Morgan, which advised RCOM in the last transaction announced in July, invited bids from financial investors last week.
Indications are that the new deal will be bigger. July’s deal fetched RCOM $338 million and valued the tower business at $6.75 billion.
The bidders are likely to be financial investors like hedge funds and institutional firms. An RCOM spokesperson declined to comment on the development.
This time, Reliance wants the business to be valued at about $9 billion. It believes that the tower business’ profitability will increase as ‘tenants’ increase. For instance, RCOM’s GSM business’ rollout in 16 circles will be considered another tenant. The introduction of 3G and WiMax next year will give opportunities for further tenancies. The wireless tower business is seeing frenetic activity as companies begin to see immense benefits in spinning of the asset and either listing it separately or selling a small stake to investors at a premium.
A wireless tower enables the smooth passage of signals across a wide expanse of territory and is crucial in helping telecom companies achieve penetration. Big telecom companies own thousands of towers but it need not always be on their books.
The companies can spin off the tower business into separate entities and lease space on them to rival telecom companies. The tower business becomes an independent company with its own revenue stream and a relatively stable business model.