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Reliance Ignites Infratel IPO

After a lengthy delay caused by the global economic downturn, Reliance Communications Ltd. has reignited its plans to take its tower arm, Reliance Infratel, to IPO.

The company says it will soon file a prospectus with the Securities and Exchange Board of India (SEBI) for a 10 percent issue, which has previously been valued at 60 billion Indian rupees (US$1.23 billion). (See IndiaWatch: Four for Thought .)

Reliance initially announced its Infratel IPO plans in February 2008, but called it off in August last year, citing "volatility in global and Indian capital markets." (See India Roundup: Tender Times, Stock Issues.)

Now it's back on.

Reliance Infratel, which operates in all of India's 22 telecom service areas (known as circles), had revenues of INR14.6 billion (US$304.6 million) and an EBIDTA margin of 46.3 percent in 2008. (See A Guide to India's Telecom Market.)

Infratel had about 50,000 multi-tenancy towers at the end of June 2009, with Reliance Communications, not surprisingly, its largest single customer.

The captive tenancy rate -- that is, the average number of customers per site -- increased from 1.3 in the fourth quarter of 2008 to 1.6 by the end of June 2009 as a result of Reliance's GSM launch. (See Reliance Launches National GSM.)

The company expects this rate to increase further as it aims to be the preferred infrastructure provider to the new operators that received licenses in January 2008 and are rolling out services across the country.

To that end, Infratel has secured an infrastructure sharing deal worth an estimated US$2.2 billion with Etisalat 's Indian operation, Etisalat DB (formerly Swan Telecom), which includes more than 30,000 sites, as well as additional services such as backhaul, long-distance carriage, data centers, and roaming. (See Etisalat, Reliance Strike Mega Network Share Deal.)

Reliance's move comes as the Indian towers market undergoes a period of consolidation, lead by the larger players that have the backing of major operators or an international infrastructure provider.

For example, four companies -- Bharti Infratel, Tata Quippo, and international infrastructure companies American Tower Corp. (NYSE: AMT) and Crown Castle International Corp. (NYSE: CCI) -- are on the shortlist to acquire Aircel Ltd. 's tower business. Any resulting deal would further consolidate the market and increase the gap between the big four -- Bharti Infratel, Indus, Reliance Infratel, and Tata Quippo -- and the rest. (See IndiaWatch: Four for Thought .)

Reliance's move also adds further evidence that Asia/Pacific's financial markets are more bullish, and is the latest of a number of telecom-related IPO announcements in the region.

Service providers Grameenphone and Maxis Communications Bhd. have both announced IPOs recently, having delayed them from last year. (See GrameenPhone Gets Green Light for IPO and Malaysia's Maxis Plans IPO.)

SK Telecom (Nasdaq: SKM), meanwhile, has just announced it is to list the shares of SK C&C, its technology outsourcing subsidiary, in an IPO that has been valued at up to 1.2 trillion South Korean Won (US$996 million), according to this Reuters report.

— Catherine Haslam, Asia Editor, Light Reading

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