GTL May Be Largest Shareholder Post Merger With R-Infratel

By Boby Kurian

  • 23 Jun 2010

Manoj Tirodkar-led GTL Infrastructure Ltd may hold over 33% stake and will be the largest shareholder in the proposed combine with ADAG Chairman Anil Ambani's Reliance Infratel (R-Infratel), sources familiar with the development said. Both Reliance Infratel and GTL are in serious discussions to merge their operations resulting in a listed entity with over 86,000 telecom towers.

Sources added that Mr 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.

"GTL and Mr Ambani will be the two principal shareholders in this combined entity, with the former being the largest shareholder as it would like to go forward as independent tower operator post merger. GTL could hold around 33-35% stake, or anywhere between 30% and 40% as per the current discussions," said a source, who did not wish to be named.


While a few private equity giants have shown interest to participate in the merger, sources added it was unlikely to materialise at this point of time. Again, the entry of a third foreign strategic player

like Saudi Telecom into the combine, as suggested in recent media reports, is also being ruled out for the time being. "These are later day stories," sources added.

Besides the two main shareholders, the merged combine will continue to have the existing financial investors in Reliance Infratel and about 25% public participation as per the listing norms. The promoter controls 95% stake in R-Infratel with financial investors, including New Silk Route Private Advisors, holding the remaining 5%.


Meanwhile, speculation is also gaining ground that Reliance Infratel's fibre optic operations may not be part of the proposed merger with GTL Infra. It is likely to be spun off into a separate deal even though sources directly involved with R-Infratel's dealmaking refused to comment on it.

Earlier, RCom had transferred its domestic as well as international fibre optics operations (parked with FLAG Telecom) into Reliance Infratel. The fibre optics play is spread across 1,50,000 km in India, US, Europe, Middle East and Asia Pacific.

When contacted, GTL Infrastructure spokesperson said, "we do not comment on speculations." An email sent to RCom spokesperson remained unanswered at the time of publication of this article.


On June 13, RCom announced that it was restructuring the ownership of its subsidiary Reliance Infratel through a demerger or other options, and said talks were ongoing with several domestic as well as international suitors to create the world's largest independent telecom tower company.

While there is not much clarity on valuations, deals over the past six months have valued telecom towers anywhere in the range of Rs 45 lakh to Rs 55 lakh. This could value R-Infratel anywhere between Rs 22,500 crore and Rs 27,500 crore. 

The passive telecom infrastructure industry has also gone through a wave of consolidation in recent times with independent players buying operations of captive firms.


The consolidation started when Quippo Telecom Infrastructure (QTIL) merged with Wireless-TT Info-Services Limited (WTTIL), the tower arm of Tata Teleservices Limited early last year. Another deal was when US-based American Tower Corporation (ATC) acquired Essar Telecom Infrastructure Private at an enterprise value of Rs 2,000 crore. ATC has also acquired small telecom tower companies like Xcel Telecom and Transcend Infrastructure in the last one year.

The largest deal was when GTL Infrastructure 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, most of which is accounted for by Reliance Communications. It has signed up customers like Etilsalat DB, STel, Sistema Shyam (branded as MTS), Aircel, Tata Teleservices,among others. R-Infratel 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 oth RCom and R-Infratel could help the India's second-largest telecom company by subscribers nearly wipe out its entire debt.

It is believed that unlocking of value from the infrastructure business will precede a stake sale in the parent RCom, which is holding early discussions with Etisalat among others for divesting up to 26% stake in India's second largest mobile operator.

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