UPDATE 2-Debt-laden Reliance Comm eyes deals for tower unit

* Tower sale plan follows proposal to sell stake in parent

* Unit likely to be valued at more than $5 billion –
analysts

* GTL, American Tower, Crown castle among suitors-report

* Reliance Industries also a likely suitor – analyst

* Shares rise as much as 5.2 pct before paring gains
(Adds more comments, valuation, background)

By Devidutta Tripathy

NEW DELHI, June 15 (BestGrowthStock) – Reliance Communications’
(RLCM.BO: ) plan to open up its telecoms tower unit to investors
signals the ammunition India’s No. 2 mobile operator can tap as
it aims to cut its huge debt in a fiercely competitive market.

Carriers in India’s cut-throat cellular sector, also the
world’s fastest-growing – with more than 600 million users –
have been shedding their tower businesses and renting capacity
to cut debt and lower costs.

Last week, Reliance Comm, controlled by billionaire Anil
Ambani, unveiled plans to sell up to a 26 percent stake in
itself, after India sold licences for 3G wireless services at a
price far higher than expected. [ID:nSGE6570D1]

Talk about a stake sale started soon after controlling
shareholder Anil and his long-estranged brother Mukesh ended an
agreement that forbade them from competing on each other’s
turf, freeing Anil to bring new investors into his debt-laden
company.

On Monday, Reliance Comm said its board approved a proposal
to bring investors into its tower arm and help create an
independent tower company. The tower unit could be valued at
more than $5 billion based on recent telecom tower deals in the
Indian market. [ID:nSGE65D0GE]

“The game plan is to add as much as ammunition possible to
your balance sheet,” said New Delhi-based Jagannadham
Thunuguntla, head of equity at SMC Capitals, referring Reliance
Commm’s plans. “Be it a stake sale in the mobile company or the
tower unit.”

Demand for tower assets is set to increase as winners in
the recent licence auction start to roll out third-generation
services.

Brokerage Anand Rathi Financial Services estimates Reliance
Comm has consolidated net debt of 341 billion rupees ($7.3
billion) after the 3G licence auction and that could almost
halve if it strikes a deal through a mix of cash and stock.

By 0830 GMT, Reliance Comm shares were up 3.2 percent in a
flat broader Mumbai market (.BSESN: ), after rising as much as
5.2 percent in early trade.

Nearly 10 million shares of Reliance Comm were traded on
the National Stock Exchange, compared with full-day average
volume of 9.3 million over the past 30 days.

After being one of the worst performers in the benchmark
Mumbai index for much of 2010, Reliance Comm’s shares have
erased losses for the year on talks for the stake sale and are
up about 6 percent so far this year.

‘ADVANCED TALKS’

Reliance Comm is looking at options including a “demerger
and/or other suitable value-creating options” of the tower
assets of its Reliance Infratel unit, and would be paid in cash
and stock.

The company, which had earlier planned to sell 10 percent
of Reliance Infratel through an initial public offering, said
it was in “advanced stage” talks with several international and
local strategic and financial players for the tower unit stake
and expected to announce a deal shortly.

“The Infratel IPO doesn’t seem to be happening — the
overall market conditions are not great and the mood in the
telecoms sector is also not favourable. So how to monetise the
assets in one form or the other,” Thunuguntla said.

Reliance Comm also said its aim was to form an independent
tower company not owned or controlled by a telecoms carrier
that would help get more contracts among competitors and from
firms who have obtained spectrum in recent auctions.

The Economic Times newspaper named India’s GTL
Infrastructure (GTLI.BO: ), U.S.-based tower firm American Tower
(AMT.N: ) and a consortium of Crown Castle (CCI.N: ) and private
equity Blackstone (BX.N: ) among the suitors. [ID:nSGE65E026]

GTL, which earlier this year agreed to buy mobile firm
Aircel’s towers in a $1.8 billion deal, is India’s largest
tower company without any holding by a mobile carrier.

A spokesman for GTL declined to comment.

Brokerage Religare Capital markets said Reliance Industries
(RELI.BO: ), which is buying Infotel Brodaband that emerged as
the only firm to secure nationwide broadband spectrum, could
also be a likely suitor for the Reliance Comm tower assets as
it would need tower and fibre infrastructure to roll out
broadband.

Stock Basics

($1=46.7 rupees)
(Additional reporting by Rajesh Kurup in MUMBAI; Editing by
Ranjit Gangadharan and Anshuman Daga)

UPDATE 2-Debt-laden Reliance Comm eyes deals for tower unit