ADAG Chairman Anil Ambani's Reliance Infratel (R-Infratel) and GTL Infrastructure have agreed to a Rs. 50,000 crore (US$ 11 billion) deal to create the world’s largest independent telecom infrastructure company. The deal is expected to be a mixture of cash payment and equity shares of GTL Infra, which will help R-Infratel's parent firm Reliance Communications, reduce its debt.

Details of the quantum of cash infusion to RCom, and the share swap ratios for RCom and R-Infratel minority shareholders will be finalised in due course with the help of independent valuers and advisors, said the ADAG group firm in a release. RCom also said that the optic fibre

network of over 200,000 kms and related assets presently under R-Infratel will be retained by RCom.

VCCircle reported last week that Manoj Tirodkar-led GTL Infra may hold over 33% stake and will be the largest shareholder in the proposed combine with R-Infratel. Anil Ambani's stake in the entity, estimated to be around 26%, will be mostly in his personal capacity. And GTL's payout as part of the transaction will be made to both Reliance Communication as well as the personal investment vehicles of its promoter.

Standard Chartered Bank acted as the financial advisor to GTL Infra for this transaction.

The combined entity will have over 80,000 towers and over 1,25,000 tenancies from over 10 telecom operators such as Reliance Communications, Aircel, Etisalat DB Telecom, MTS, Uninor Telecom, Videocon Mobile, Tata Teleservices, Vodafone, S Tel  In addition, the merged entity will have a firm option on additional 75,000 tenancies from leading players.

Around 2 million shareholders of RCom and the minority shareholders of R-Infratel will get shares of the combined entity. The deal is expected to close over the next 6 months.

This would be second deal by GTL Infra in the last six months. In January it paid Rs 8,400 crore ($1.84 billion) to acquire Aircel's tower business. GTL acquired 17,500 telecom towers, increasing its tower count to around 32,000 sites, at a valuation of Rs 48-49 lakh per tower. At the time of Aircel deal, GTL Infra said, it plans to increase its current tenancy ratio of 1.2 times to 2.3 times in the next three years.

R-Infratel has a tenancy ratio of 1.75 times and reported revenues of Rs 4,934 crore with a profit after tax of Rs 1,685 crore in FY09.

RCom has embarked on a stake sale, which also includes selling a 26% stake to a strategic investor in the telecom business, in order to cut its massive debt. RCom had a net debt of Rs 19,889 crore at end of March' 10, which increased to around Rs 28,500 crore after the

recently concluded 3G auctions. This further increases if we include Rs 5,600 crore in interest-bearing vendor liabilities. Stake sales in RCom and R-Infratel could help the India's second-largest telecom company by subscribers nearly wipe out its entire debt.

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