After a drop in its Q3 net profits by 19.34% to Rs 1,164.82 crore for FY 09-10, the latest news of the much-awaited Rel Infra-GTL deal been called off, comes as another major setback, in a deal that would have seen RCom reduce its debt burden by $3.9 bn.
On June 27, 2010, RCom and GTL Infra had signed a Non-Binding Term Sheet for a merger that would see a combined tower strength of over 80,000 towers, with an enterprise value of $11bn, which would have made it the largest telecom infrastructure firm in the world. However, as the deed expired on August 31, 2010, with no efforts by either party to extend the agreement deadline or enter into a new contract, the deal has been officially called off, with a notice to that effect being sent by GTL to the BSE, after a meeting of the Board of Directors of GTL on September 6.
According to an official statement by an RCom spokesperson, “Following the expiry of the non-binding Term Sheet with GTL Infrastructure Ltd., Reliance Communications Ltd. is now engaged in discussions with certain other strategic and financial investors, to pursue a similar transaction aimed at significant reduction in the Company's debt and unlocking of value for RCOM shareholders from the passive infrastructure and related assets in its 95% owned subsidiary, Reliance Infratel Ltd.” This statement comes after previous reports that RCom and GTL Infra would convert around Rs 6,000 cr of loans from promoters into equity, to issue fresh shares worth $1 bn to investors to aid the merger.
Reliance Infratel also added that it was proposing, subject to market conditions and other considerations, an IPO of its equity shares and has filed a DRHP with SEBI to that effect. It is a known fact that the company has for sometime being trying to sell a 26% stake, to relive its debt burden.
In January this year, GTL Infra bought over Aircel's 17,500 towers in a Rs 8,400 all-cash deal, making it the world's largest independent tower company with 32,500 towers. GTL Infra is now second to Quippo-WTTIL, now the world's largest telecom infrastructure company, with 38,000 towers.
Source: Voice n Data