June 2010
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RCom-GTL deal leaves key questions unanswered

Reliance Communications Ltd’s subsidiary Reliance Infratel LTd, and GTL Infrastructure had in-principle approved a Rs 50,000-crore deal to create the world’s largest independent telecom infrastructure company, neither owned nor controlled by any telecom operator.

The deal may be done but the dust is yet to settle. The clarity on the structure of the merged entity Reliance Infratel's tower assets into GTL infra is still awaited.

However, sources indicate that GTL promoter stake in GTL Infra may go down to 26 per cent. As part of transaction, sources say treasury stock of 8 per cent to be also created, which can be reissued later.

Sources further say that GTL Infra may get in a private equity investor post completion of the deal.

Also, Anil Ambani is likely to hold approximately 26 per cent in GTL Infra, and part of Reliance Infratel debt may be transferred to GTL Infra.

But the deal throws up more questions than answers. Such questions are like from where GTL is going to pump in cash of about Rs 20,000 crore and how much debt will be transferred from Reliance Infratel to GTL.

The deal also makes someone wonder whether a premium of about 15 per cent over the Aircel deal is justified considering that the EV for each tower in case of Aircel was valued at Rs 35 lakh while in case of RCom it is valued at Rs 40 lakh.

From a shareholders point of view, it remains to be seen what will be the share swap ratio between RCom shareholders and GTL Infra.

The deal is expected to close within six months. The combined entity would have 80,000 towers and over 1.25 lakh tenancies.

Source: NDTV Profit

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