Indian internet and telecoms company Reliance Communications said on Wednesday (21) it had agreed to sell its mobile phone tower business to Canadian asset management giant Brookfield for $1.6 billion (£1.3 billion).
Reliance Communications said the deal represented the largest investment by a foreign investor in Indian infrastructure and comes as Brookfield seeks to capitalise on liquidity constraints at major Indian firms.
Indian companies are struggling to acquire capital as the central bank puts pressure on lenders to address bad loans. Firms are choosing asset sales to boost coffers and reduce debt, Bloomberg has reported.
In a statement to the Bombay Stock Exchange (BSE), Reliance Communications said it was announcing the “signing of binding agreements” with Brookfield Infrastructure to sell its nationwide tower assets for 110 billion rupees.
“(Reliance Communications) will utilise the upfront cash payment of 11,000 crore rupees ($1.6 billion) solely to reduce its debt,” the firm, led by Indian billionaire tycoon Anil Ambani, said in the statement.
“The transaction will represent the largest ever investment by any overseas financial investor in the infrastructure sector in India,” it added.
Reliance Communications said the sale, together with its recent merger with Aircel, would help reduce its overall debt by nearly 70 percent, sending its shares on the BSE’s Sensex soaring by almost nine percent.
The Indian company said that while its tower business would be demerged into a separate company that would be 100 percent owned by Brookfield Infrastructure, it would benefit financially from non-voting shares.
“The company expects significant future value creation from these class B shares owing to the 4G rollout and the expected growth of the telecom industry,” said the statement.
India’s increasingly competitive telecoms market is undergoing a 4G revolution as major players including Vodafone, Idea, and Reliance Jio, which is owned by Anil Ambani’s older brother Mukesh, and Bharti Airtel vie for dominance.
Bloomberg News reported earlier this month that Brookfield was in talks to take over Bharti Airtel’s wireless tower business, Bharti Infratel, as it said the Canadian firm was looking to expand its Indian portfolio.
It comes as the Reserve Bank of India is forcing banks to clean up their balance sheets.
Brookfield signed a deal with the State Bank of India earlier this year and last month its South Asia head told Bloomberg that the asset management firm had struck a $1 billion agreement with Indian commercial property firm Hiranandani Developers Pvt.