"Two of the bidders want to buy out RCom's entire stake, while the two others want 51%. RCom would prefer to completely exit the tower business even if the deal comes at a slightly lower valuation as it needs the funds to reduce its debt (of over Rs 38,000 crore)," one of people told ET. He added that Reliance Infratel is being currently valued at Rs 20,000-24,000 crore. The valuation includes aboutRs 8,000 crore of debt.
People directly involved in the process said that management presentations have been completed and the due diligence process should be over in two weeks from now at most, by the first week of October. "Final binding bids and financial commitment and closure of the deal is, therefore, expected to be in another two weeks from then, around October 20-22."
Standard Chartered and SBI Capital Markets are managing the stake sale process. Farallon and Tillman officials didn't respond to emailed queries for comment at press time. RCom and Carlyle declined to comment, while ATC refused to comment on "speculation".
ATC is also reported to be in talks to buy into another tower company, Viom Networks. Another person familiar with the matter said that while ATC which is looking at growth options in India is holding talks with RCom, it is evaluating both opportunities. The RCom stock ended 1.1% higher at Rs 64.95 on the Bombay Stock Exchange Wednesday, outpacing the benchmark index.
Reliance Infratel is 96% owned by RCom, India's fourth largest telecom operator. Minority and institutional investors such as George Soros' Quantum (M), NSR Partners, Galleon, HSBC Daisy Investment (Mauritius), Drawbridge Towers, Investment Partners B (Mauritius) which invested $287 million in 2007 own the remainder.
The Anil Ambani-owned telco has a debt of over Rs 38,000 crore as of June 30, a burden that it seeks to reduce by trying to sell its tower and overseas business units, as well as monetise its DTH arm and land holdings. It expects to also raise some funds from trading and sharing its airwaves with Reliance Jio Infocomm, owned by Anil's elder brother Mukesh - deals which are awaiting notification of the rules on both by the government, sources said.
Prospects for tower operators have improved since 2012 when mobile phone companies scaled down operations or had their licences cancelled by the Supreme Court. Competition has eased, allowing telcos to improve cash flows that can be invested on expanding and upgrading networks.
Tower companies are also signing up operators for the rollout of 4G networks. ET had first reported on May 6 that RCom is looking to sell a majority stake in Reliance Infratel, the country's No. 3 tower company, to focus on core operations and pare debt.
Reliance Infratel, with some 45,000 towers and over 1,20,000 km of intra- and inter-circle fibre network, trails Indus Towers and Bharti Infratel by number of towers. Bharti Infratel, the only listed tower company, has about 86,000 towers and was valued at nearlyRs 75,000 crore on Wednesday, according to BSE data.
Reliance Infratel sets up towers on which mobile phone companies install equipment that emit microwave signals to mobile phones. The move to monetise Reliance Infratel comes about five years after a proposal for an initial public offering fell through due to stock market conditions, turmoil in the telecom industry, litigation and the absence of a clear valuation mechanism.
Also, at that time, RCom was the only tenant on the towers.
Things have changed since, with greater policy certainty and more pricing power, besides surging demand for data
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