Investors decry RCom's plans

A month ago, Reliance Communications and Aircel announced their merger creating the 4th largest telecom company in the country.

Earlier this month, Anil Ambani owned, Reliance Group, again made the headlines for its joint venture with Dassault Aviation for landing a massive Rs. 30,000 crore defence contract.

Two days ago, Zee announced its decision to acquire Reliance Broadcast Networks for around Rs. 1900 crore.

RCom, has set targets to be debt-free by end 2017 considering that RCom is the most indebted mobile-phone service company in India. Its debt is approximately Rs 42,000 crore.

Proceeds of Rs. 11,000 crore from proposed sale of 51% stake in mobile-tower business, will be utilised to reduce RCom's debt burden.

RCom is expected to monetize its real-estate to raise additional Rs. 5,000 crore.

Reliance Communications (RCom) has agreed to sell a majority stake in its mobile phone tower business.

RCom will retain 49% and sell 51% of the stake to the Brookfield Infrastructure Group, a Canadian company, for Rs. 11,000 crore in cash.

The restructuring at RCom is underway essentially to reduce the debt burden of the company.

RCom is the most indebted amongst all mobile-service providers.

According to the term sheet signed between RCom and Brookfield, RCom will retain 49% as significant growth is expected in telecom tower tenancies due to growth in 4G networks and rising data consumption.

The 51% stake will be transferred to a company owned by Brookfield.

RCom will not be expected to incur operational or capital expenditure to manage its tower business.

RCom's recent disclosure of a non binding term sheet with Brookfield Infrastructure for RCom's tower assets has drawn flak from investors.

Despite RCom's assurances that the Aircel merger and the Brookfield tower deal would reduce debt by 60%, RCom shares have plunged 6%.

According to the Brookfield deal, RCom "will enjoy 49% future economic upside from the towers business, based on certain conditions."