RCom shareholders approve demerger of tower business

Anil Ambani-ledReliance Communications (RCom) on Tuesday said that its shareholders have approved the demerger of tower business into Brookfield Infrastructure Group.

RCom, in a BSE filing said, “The shareholders of Reliance Infratel Limited (RITL) – a subsidiary of Reliance Communication at their meeting held on April 29, 2017, have approved with 98% majority the scheme of arrangement for demerger of the tower division of the RITL into Towercom Infrastructure Private Limited (TIPL).”

Shareholders of TIPL also in its meeting held on the same day, have given clean nod to the proposed scheme.

On completion of the deal, a subsidiary of Brookfield will acquire 100% of TIPL – thereby creating largest independent and operator-neutral towers company in India.

RCom will receive upfront cash payment of Rs 11,000 crore ($1.7 billion) on demerger of tower business. Net proceeds are expected to be utilised for reducing RCom's net debt.

The company said, “The already announced combination of RCom’s wireless business with Aircel, and the monetisation of the Tower business, will together reduce RCom’s overall debt by Rs.31,000 crore (US$ 4.8 billion), or nearly 70% of existing debt.”

Further, RCom will also subscribe for Class B non-voting shares in TIPL, providing 49% future economic upside in the Towers business, based on certain conditions. 

"The company expects significant future value creation from the B Class shares, based on growth in tenancies arising from increasing 4G rollout by all telecom operators and fast accelerating data consumption, " said Rcom. 

Moreover, RCOM and Reliance Jio will continue as major long term tenants of the TIPL along with other existing third party telecom operators.

Recently, the Competition Commission of India approved for the proposed scheme.