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RCom will spin-off its telecom tower business, run by its subsidiary Reliance Infratel Ltd. The boards of RCom and Reliance Infratel have approved a proposal to restructure the ownership of Infratel and this will be implemented through a demerger and/or other suitable value creating options vis-a-vis Infratel’s assets. The consideration would be received in a combination of cash and stock. Infratel owns and operates 54,000 towers across the country, with RCom as the anchor tenant.?A back-of-the-envelope calculation values the towers at around Rs25,000 crore.

Infratel, in which RCom owns 95%, is willing to bring in a potential investor ahead of a proposed stake sale in RCom to improve the valuation of the flagship firm by reducing its debt burden. On 6 June, RCom received board approval to sell 26% equity in the company to strategic or private equity investors. RCom and Infratel are at an advanced stage of discussions with several domestic and international, strategic and financial players to finalise the proposal and it is anticipated that transaction would be announced shortly.

The cash infusion would lead to substantial reduction of consolidated debt and improved leverage ratios for RCom, while the equity participation would enable future participation in growth projects. The proposal would lead to consolidation in the tower infrastructure business, resulting in scale benefits and operational synergies. This exercise is aimed at getting better valuation for RCom through deleveraging its books.

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