Today, Reliance Communications was also in the news as it filed a Draft Red Herring Prospectus (DRHP) for Reliance Telecom Infrastructure, valued at Rs 5,000 to Rs 6,000 crore. Reliance Infratel Ltd. is expected to have 60,000 towers by FY09 and Reliance Communications will hold 95% of the company. Today, Reliance Communications closed at Rs 685, up 12% on the BSE. Shares of Reliance Communication advanced on reports that its subsidiary Reliance Telecom Infrastructure, is planning to hit capital market with Rs 5,000-6,000 crore initial public offer.
Reliance Telecom will sell nearly 10 per cent of its post-issue share capital through the IPO which will put its valuation more than double of what it achieved in July 2007 when it privately placed 5 per cent stake to a group of institutional investors.
RTIL, a 95 per cent subsidiary of Reliance Communications, sold the stake for Rs 1,400 crore to a host of investors including George Soros, HSBC, Fortress Capital, New Silk, Galleon, DA Capital and GLG Capital in a deal which had put its valuation at Rs 27,000 crore.
Going by the IPO size, the equity valuation of RTIL, a company engaged in the business of building, owning and operating communications towers, will be around Rs 50,000-60,000 crore. This will translate into nearly Rs 250-300 per RCOM share.
RCOM demerged its tower assets in RTIL last year in a move which was followed by most telecom companies in India. RTIL has a presence in all 23 telecom circles in the country. It has a 10-year master services agreement to provide passive telecom infrastructure to RCOM
In my post dated December 31, 2007, I'd given the following reasoning for an investment in Reliance Communication (RCOM):
Having established itself as a dominant player in the CDMA segment, RCOM is all set to take the GSM segment by storm when the company will launch its GSM operations in 2008. The company is also planning to introduce a net-enabled phone at only Rs. 480/- per handset. This marks a steep discount to the currently available internet browsing phones at a cost of Rs. 1,400/-! The company intends to place an initial order for 12 million handsets. It will target the 600 million rural population and sell around 1 million pieces a year in the rural and semi-urban areas. The company is also looking at roping in the labour ministry that is looking at digitisation of communication technology and making mobile phones affordable to farmers.
Reliance Communications is looking to expand its tower business to take on the mega tower company created by the big three GSM players of the Indian mobile market. For this purpose Anil Ambani's tower company seems to be targeting an unlikely partner, the state owned telecom giant Bharat Sanchar Nigam Limited (BSNL). The company had earlier invited bids from private players for taking towers on rent but this venture will be different as towers will be shared on a reciprocal basis. Reliance tower infrastructure limited has about 17,000 towers while BSNL has about 36,000 towers putting their total tower strength at 53,000 towers. Both of them are not very far from the 70,000 towers under Indus tower, the joint venture tower company of Bharti Airtel, Vodafone and Idea. All these factors combined should push the share price of RCOM in the Rs. 850 - Rs. 900 range!
No comments:
Post a Comment