All eyes on RCom’s tower & fibre optic businesses

Suitors include Reliance Jio, Bharti Infratel, ATC, Sistema, TPG Carlyle and Gateway Partners

Leading telcos, tower infrastructure companies and private equity (PE) funds have shown interest in picking up the entire mobile tower and the fibre optic assets of Reliance Communications (RCom) that are up for sale.

These include Bharti Infratel, American Tower Corporation, Tilman Global Holdings, Sistema and Brookfield apart from PE funds TPG, Carlyle, Squared Capital and Gateway Partners.

Bharti Infratel and Sistema declined to comment on the issue, queries sent to ATC, Tillman and Squared Capital did not elicit any response. Both Carlyle and TPG declined to comment and Gateway could not be reached.

The fibre optic business has attracted interest only from Reliance Jio which has also shown interest in the tower assets. Jio did not respond to a query.

The move comes close on the heels of the Anil Ambani group giving a plan for debt restructuring to the consortium of bankers. RCom, which has a debt of ~40,000 crore, has suggested that it would be able to garner ~17,000 crore by monetising its tower, fibre and spectrum assets. It could get another ~10,000 crore from the sale of real estate. It has also suggested that the bankers convert around ~7,100 crore of their loans into equity by which they would have a 51 per cent stake in a truncated RCom.

According to analysts, the company owns over 43,000 towers and one of their key anchor tenant is Jio, which had signed a long-term deal at an attractive rental.

RCom had earlier signed an exclusive understanding with Brookfield to sell 51 per cent stake in its tower assets for ~11,000 crore. However, the deal fell through recently after RCom called off its merger with Aircel, which was supposed to be one of the tenants on the RCom towers. With the tenancy on the towers falling due to Aircel not joining the deal, Brookfield was not willing to pay the same value for the assets anymore, sources indicated.

The value, say experts, of the tenancy would fall further to around only 1.2 as RCom now has decided to close down its voice services from November 30. Companies in the business say that the valuation of the towers varies from ~30 lakh to ~70 lakh. However, in the case of RCom, due to the lower tenancy, it could be on the lower side.

On the upside, as much as 26 per cent of the towers are connected with fibre optic backbone rather than microwave, making it attractive for 4G data as well as 5G services. Also 45 per cent of the towers are in the metros and the category-A circles.

The company also has over 178,000 km of fibre across the country, out of which as much as 18,000 km are in the top cities. As much as 1.2 million buildings and 3.5 million households are directly connected to fibre. Even here, Jio is one of their main users, utilising about 115,000 km of their fibre. The company has also built its own fibre network to supplement that of the junior Ambani.

Fibre optic infrastructure is a valuable asset, especially at a time when companies like Jio are preparing to roll out fibre to home broadband across the country.