Blackstone, Carlyle set to buy Anil Ambani's RCOM towers

MUMBAI: Reliance Communications (RCOM) has entered into exclusive negotiations with private equity consortium of Blackstone and Carlyle to sell its tower unit, with a deal likely to happen by December, said a source directly familiar with the process. The transaction is expected to value the tower asset in excess of $3.5 billion making it India's largest PE deal till date. Blackstone is likely to be the lead investor in the buyout transaction for which discussions were now advanced. Anil Ambani-controlled RCOM may conclude a tower sharing deal with his elder brother Mukesh Ambani-owned Reliance Infotel ahead of the tower unit sale which could buoy the PE investors. "We have shortlisted Blackstone and Carlyle consortium from three initial bids, and we are talking only with them for the sale of tower unit. The commercial offer has come and we hope to close the transaction by December," said the source mentioned earlier. This source, however, declined to discuss valuation of the tower unit with 50,000 odd towers. TOI first reported that Blackstone and Carlyle were evaluating a joint bid for the tower unit, which was put on the block with parent RCOM wanting to retire a substantial part of the Rs 32,000 crore debt on its books. A second source said tower sharing deal with the Mukesh Ambani firm may help the valuation of the tower unit for which the private equity consortium had offered a base price of $3 billion. "The tower sharing deal is most likely to boost the valuation," he said, as RCOM may be eyeing a deal at around $4 billion. Mukesh Ambani's Infotel holds pan Indian spectrum for broadband wireless access, which it had won last year, and now wants to start a major roll out next year. It would make an upfront payment of around $100 million as part of this long-term tower sharing arrangement. A spokesperson for RCOM declined to comment on speculation. RIL too refused comment. The tower sharing will strengthen the tenancy ratio-the number of tenants per tower-of RCOM's tower unit, which stands at 1.74. A tower company can have more than one operator as a tenant which basically determines its profitability. An industry player says a tower company can double its tenancy ratio without making any capital expenditure. Getting on board Reliance Infotel as a tenant can easily take up the crucial tenancy ratio depending on the number of towers that are leased out. An analyst tracking the telecoms sector, on conditions of anonymity, said that tower unit's tenancy ratio, which is rather moderate right now, can easily move up to over 2 if all the towers are leased out to RIL. "It is not very difficult to have a ratio of 3 but Indian tower companies have not been able to do that successfully." Typically, a monthly rent of Rs 20-25,000 is charged by tower companies to rent out their infrastructure to operators in India depending on the location of the towers.