Reliance Communications to spin off tower business

Indian fixed and mobile operator Reliance Communications (RCOM) has announced that it is to spin out its cell tower subsidiary Reliance Infratel. The move would create the world’s largest independent telecoms infrastructure company, the firm said Monday.

RCOM said that the two firms are today in advanced discussions with “several domestic and international strategic and financial players” over the sale of the business and that”barring unforeseen circumstances and subject to necessary approvals, a transaction will be announced shortly.” The firm was at pains to stress that the newly independent firm would not be majority controlled by one single operator investor, and that the interests of Reliance Communications as the “largest tenant will be protected through appropriate contractual arrangements.”

As well as allowing RCOM to pay down a “substantial” amount of debt, the move is motivated by the recent conclusion of both the Indian 3G and Broadband Wireless Access spectrum auctions. “Our transformational initiative…will facilitate efforts fo new telecom players to achieve the most extensive and fastest nationwide rollout, in the most cost effective manner,” said RCOM chairman Anil Ambani.

“I am personally looking forward to an era of healthy co-operation and collaboration with existing and new players, especially recent winners of 3G and BWA spectrum,” he added.

The biggest newcomer to the Indian wireless scene is fixed player Infotel Broadband, which was the only bidder in the BWA auction to win 20MHz of spectrum in every operating area in India. Infotel is in the process of being purchased by Ambani’s estranged brother Mukesh, through his firm Reliance Industries Limited. When the two brothers split the Reliance conglomerate in 2005, Mukesh was forced out of the telecom industry by a non-compete clause that was revoked at the end of May this year.

RIL has said that it intends to employ an “asset light” strategy and has pledged to “forge several strategic relationships” with carrier and infrastructure players as part of its plans to deploy LTE.

There has been speculation that a rapprochement of sorts between the two brothers might be in the offing and that the two Reliance firms may well look to cooperate in the future. Alison Hancock, a consultant at Coleago Consulting, which advised one of the bidders in the BWA auctions, said that Anil Mukesh pulled out of the BWA auctions at an early stage, while his brother had no involvement in the 3G spectrum auction.

Another potential partner for Reliance Infratel could be Qualcomm, which won BWA spectrum in Delhi, Mumbai, Kerala, Haryana and said that it, too, was looking for partners to help it deploy an LTE network. However, Hancock said that it was being widely rumoured while she was in India during the BWA auctions, that Qualcomm had already struck a deal with another Indian tower firm, GTL.

In an unrelated move, RCOM has also approved a proposal to offer a 26 per cent stake in itself to strategic or private investors.