Billionaire Anil Ambani’s Reliance Communications Ltd’s ended talks to sell some assets to GTL Infrastructure Ltd after the two failed to agree on a deal to create India’s second-largest operator of mobile-phone towers.
A non-binding agreement in June expired on Aug. 31 and neither side is extending the deadline, GTL said in a filing to the Bombay Stock Exchange yesterday.
Reliance has begun discussions with other potential investors and is also considering an initial public offering of the tower unit, called Reliance Infratel, it said in an e-mailed statement, without specifying names.
A purchase would have more than doubled GTL’s number of transmission towers and created a company with an estimated value of 500 billion rupees (US$11 billion).
Reliance Communications, the second-largest wireless operator in India, fell 0.7 percent to Rs162.1 in Mumbai trading on concern the collapse of the deal would undermine the company’s ability to reduce debt. GTL dropped 3.5 percent to Rs43.6.
“This deal was important for Reliance Communications,” said Jigar Shah, an analyst at Kim Eng Securities India Pvt in Mumbai.
“If it’s not going through, they need a backup plan,” he said.
Vikas Arora, a spokesman for GTL in Mumbai, declined to elaborate on yesterday’s statement. GTL agreed to buy about 50,000 transmission towers from Reliance in exchange for cash and stock, the companies said in June.
GTL was to have given new shares worth as much as US$3 billion, more than triple its market value, to Reliance Communications shareholders and assume about 180 billion rupees in debt for the tower assets, two people familiar with the matter said in July.
A purchase would have increased GTL’s number of transmission towers to about 80,000 from 33,000. GTL in January bought 17,500 towers from Aircel Ltd for Rs80.3 billion.
Reliance said it couldn’t disclose why the deal with GTL collapsed, citing confidentiality agreements. It’s now pursuing a similar transaction that would result in a “significant” reduction of debt, the company said.
The company, which has said it plans to sell a 26 percent stake in itself for an “appropriate” premium, said in June the tower sale would lead to a reduction of debt.
Emirates Telecommunications Corp chairman Mohammed Omran said the same month that investing in Reliance was among options the United Arab Emirates company is considering to expand in India.
Reliance’s debt exceeded cash and equivalents by Rs284 billion as of the end of June, the phone operator said. The firm also paid Rs85.9 billion for the right to use third-generation spectrum in a recent government auction of airwaves.
Assets of Reliance Infratel include an optical-fiber cable network of 190,000km, according to a June 16 report from HDFC Securities Ltd. Tata Teleservices Ltd, NTT DoCoMo Inc’s Indian partner and Uninor, a venture between India’s Unitech Ltd and Norway’s Telenor ASA are among Infratel’s customers.
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