Canadian alternative asset manager Brookfield will have to pay less than originally agreed for a 51% stake in Reliance Communications Ltd’s (RCom) mobile tower arm to reflect the reduced value of the asset after merger talks between the Anil Ambani-controlled telecom firm and Aircel Ltd collapsed.
“RCom and Brookfield are in discussions on the tower arm stake sale and are deeply engaged. The final deal value will be different due to the lack of additional Aircel tenancies, which would have come in, and will be announced in the next few weeks,” Punit Garg, president (telecom business) and executive director of RCom, said in an interview.
Brookfield had in December agreed to pay RCom upfront cash of Rs11,000 crore for a 51% stake in Reliance Infratel Ltd, in one of the largest foreign direct investments in India.
On Sunday, RCom said in a regulatory filing that the merger agreement with Aircel was allowed to “lapse by mutual consent”, due to regulatory delays and opposition from some creditors, Mint reported. In its filing to stock exchanges, the firm said it is looking at alternatives to reduce debt, including sale of real estate assets and “optimization of spectrum”.
RCom had signed binding agreements in September 2016 for the merger of its wireless assets with Aircel. RCom was expecting a transfer of Rs14,000 crore of debt to the merged entity.
The merger would have created one of India’s largest telecom operators in terms of subscriber base. According to the agreement, ownership of the merged entity would have rested equally with RCom and Aircel’s parent, Malaysia’s Maxis Communications.
The merger was also expected to boost tower tenancy ratio of Reliance Infratel from existing 1.87 to 2.4 times with the additional tenancies coming from Aircel’s operations.
Currently, Reliance Infratel’s tenancies largely come from parent RCom and Reliance Jio Infocomm Ltd, the telecom subsidiary of billionaire Mukesh Ambani’s Reliance Industries Ltd.
With a debt of over Rs45,000 crore, RCom is one of the most leveraged telecom firms in the country. In June, RCom’s lenders had invoked strategic debt restructuring (SDR) clauses for the firm which allows lenders to convert debt into equity in case of non-repayment.
The banks, however, allowed RCom to defer repayments till December on assurances that the stake sale of the telecom tower business and merger of its wireless assets with Aircel will free up enough cash for debt servicing.
Among its other creditors, the Indian unit of Sweden’s Ericsson has filed insolvency petitions against RCom and two of its subsidiaries before the National Company Law Tribunal (NCLT) in Mumbai, Mint reported in September.
Network services provider Ericsson India Pvt. Ltd, an operational creditor, has sought NCLT’s intervention for recovering dues totalling about Rs1,154 crore from RCom and subsidiaries Reliance Infratel and Reliance Telecom Ltd.
A senior RCom official who did not want to be named said that the company remains committed to its debt-repayment plan and will explore various possibilities which may include selling a higher stake in the tower business to Brookfield instead of the original 51% for the same value or completely exiting the tower business.
Separately on Monday, RCom said it had expanded its board by inducting Garg and chief financial officer Manikantan V.
Suresh Rangachar, head of the fibre and tower business at Reliance Infratel Ltd (RITL), will be executive director on the RITL board, while Gurdeep Singh, co-chief executive of the mobility business, was made executive director on Reliance Telcom Ltd’s board.