RCOM would demerge its tower assets into a separate SPV which would be 100% owned and independently managed by Brookfield. RCOM would receive an upfront payment of Rs110bn and non-voting Class B shares providing ~49% future economic upside in the new tower entity (based on performance).
RCOM and Reliance Jio would be the anchor tenants on these towers under a long term MSA with Brookfield along with other third party tenants. Final deal is expected to be closed after customary court and lenders approvals for demerger process by mid-2017.
RCOM would utilise the proceeds to repay debt and expects the residual business (post demerger of wireless and tower business) to have a total debt of Rs190bn (Rs500bn total debt to be reduced by Rs200bn by Aircel deal, and further Rs110bn from tower deal). The residual business would consist of Global and India Enterprise businesses and DTH operations in India
Both the entities are positive on prospects for India tower business given accelerated rollout of data networks by operators. They also see potential consolidation opportunities in the tower industry.
