Rel Infratel in tower-sharing pact with Chennai telco

Reliance Communications’ (RCom) subsidiary Reliance Infratel is looking to sign a 10-year tower-sharing agreement with Chennai-based telecom operator STel a month after it signed a Rs 10,000-crore mega deal with Etisalat DB.

The deal size, according to officials close to the development, is estimated to be Rs 800-1,000 crore with Rs 80-100 crore as annual revenues from the deal, which is for sharing towers, connectivity to sites and bulk bandwidth. The deal, according to officials, is likely to be announced on Thursday.

Reliance Infratel currently has over 50,000 towers, of which STel will have access to 10,000 towers in six service areas where the company currently has a licence to operate in.

STel will roll-out services in six circles and is awaiting a licence in 16 others. The company is also close to awarding a mega IT order ahead of its roll-out.

Reliance Infratel is RCom’s unlisted arm, which houses the entire telecom infrastructure business of the company. According to reports, Reliance Infratel had plans to mop up funds through an IPO, and is now looking at raising funds through private equity funding.

The company had announced an IPO in early 2008 that proposed to raise around Rs 6,000 crore by diluting 10% equity.
Reliance Infratel has already had a round of PE investment, where it raised Rs 1,400 crore by diluting 5% to a host of overseas investors, valuing the company at Rs 28,000 crore. The company is also eyeing the tower business of Aircel to consolidate its business.

Independent analysts say the recent agreements will help Reliance Infratel boost its tenancy ratio (the fraction of the total number of operators sharing the towers/total number of sites present), a key parameter, by which the tower business is evaluated. Currently, the tenancy ratio for India’s tower industry is between 1.6 and 1.7 and Reliance Infratel’s tenancy ratio is expected to go up to 2 after this deal.