Reliance Forms Telecom Infrastructure Subsidiary

by CXOtoday Staff    Jan 29, 2007

Reliance Communications has demerged its passive infrastructure to a cent per cent subsidiary. 12,000 new towers will be consolidated with the new company.

The company’s equity shareholders unanimously approved the demerger plan, a statement said. The plan entails transferring its existing wireless towers (CDMA and GSM) and related company infrastructure to the subsidiary - Reliance Telecom Infrastructure Limited (RTIL).

The announcement made yesterday formally declares Reliance’s entry into passive telecom infrastructure space. The company had send feelers of its foray into the space, but had remained non committal to queries on its entry into passive infrastructure sharing.

“This is the first of a series of initiatives we will be taking to remain asset-light, and enhance our competitiveness, ultimately leading to unlocking of further value for the benefit of our nearly 2 million shareholders,” said Anil Ambani, chairman - RCOM, at the time of the board’s approval to the scheme.

The demerger of passive infrastructure will benefit the stakeholders of the company on account of enhanced financial flexibility and cost efficiency due to reduced set-up and operating costs.

The statement added that all new towers and related infrastructure will be set up by RTIL, with independent financing, thereby reducing capex requirements and leveraging on RCOM’s own Balance Sheet. It will promote high value standalone business by conversion of cost-centric assets to revenue-centric ones by sharing passive infrastructure of RTIL with other wireless service providers.