Reliance Infratel Files for IPO

Reliance Communications Ltd. (RCom) , India's second largest mobile operator, filed a draft prospectus Monday to publicly list the shares of its tower infrastructure unit, Reliance Infratel.

In a statement to the Bombay Stock Exchange, Reliance said it intends to sell 89.16 million shares in an IPO, representing a 10.05 percent stake in the company. The shares will be listed on both the Bombay Stock Exchange and the National Stock Exchange of India.

Reliance created the unit early last year in preparation for the Indian telecom industry's push towards infrastructure sharing. (See Indian Operators in Sharing Mood.)

Initially called Reliance Telecom Infrastructure Limited (RTIL),Reliance Infratel manages the carrier's passive network infrastructure -- land, towers, generators, and power supply elements of the mobile network -- and will handle all new buildouts and network sharing deals with other operators. (See Reliance Approves Tower Spinoff.)

Last July, Reliance Communications sold a 5 percent stake in the unit to a group of international investors for $337.5 million, valuing the company at $6.75 billion. (See Reliance Sells Tower Stake.)

Since then, the carrier has received spectrum to expand its GSM network from eight to all 23 of India's telecom markets, pushing up the valuation of the tower unit. (See Indian Gov't Grants Mobile Licenses and Reliance Gets GSM Spectrum.) Reports suggest it could raise as much as $1.5 billion through the offering.

According to the statement, Reliance will use the proceeds of the IPO to "finance the development of passive infrastructure sites and for general corporate purposes."

In a conference call following the release of its fiscal third-quarter results last week, Reliance Communications chairman Anil Ambani told analysts the carrier plans to spend $2 billion in the financial year to March 2009 on passive infrastructure through Reliance Infratel. Another 1.3 billion would be spent on active infrastructure -- the base transceiver station (BTS), base station controllers (BSCs), antennae, and backhaul equipment. (See Reliance Updates on Profits, Capex.)

He projected the company would have 36,000 wireless tower sites by the end of this fiscal year in March, scaling up to 60,000 by March 2009.

Investors have been eager to snap up shares in tower companies as India's operators embark on massive network expansion projects. In December 2007, Bharti Airtel Ltd. (Mumbai: BHARTIARTL) sold a stake of around 10 percent in its Bharti Infratel unit for $1 billion to the likes of Temasek Holdings Pte. Ltd. , Goldman Sachs & Co. , and Citigroup . (See Bharti Sells Tower Stake.) The company had formed an independent tower unit, Indus Towers, with Idea Cellular Ltd. and Vodafone India a few weeks earlier. (See Indian Carriers Form Co..)

Reliance Infratel's prospectus notes that, with other service providers expanding and the recent round of new mobile operator licenses awarded by the government, there's an opportunity for the company to ramp up the tenancy of its wireless towers. As of December 31, its towers had an average capacity of 3.3 operators, with only Reliance Communications or its GSM subsidiary, Reliance Telecom, as occupants.

"As the wireless service providers penetrate the rural and semi-urban areas, significant investments will be required and they will consider passive infrastructure sharing as an important tool to achieve faster roll-outs and save operating and capital expenditure in these areas," it says.

Shares in Reliance Communications jumped INR73.20 (11.96%) higher Monday to close at INR685 (US$17.46) on the Bombay Stock Exchange.

— Nicole Willing, Reporter, Light Reading

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