Buyers Line up for Tower Stake Buy: RCOM

Reliance Communications (RCOM) said it has received several offers for a controlling stake in its tower arm on Tuesday, a day after it reported a worse-than-expected fall in profits in the fourth quarter.  India's second-largest telecom company by subscribers, owned by billionaire Anil Ambani, did not name the bidders but said it wanted to complete the deal at the earliest. "The board had approved taking the process to the next stage of due diligence," the company said in a statement.  RCOM said the stake sale will help deleverage its balance sheet and substantially reduce its debt, which stood at . 32,048 crore for the quarter ended March 2011. For the same quarter, the company reported a steep decline of 86% in profits — its seventh consecutive quarter of poor results. Analysts see this as a move to calm shareholders and investors, worried by the telco's higher drop in profits. The company's quarterly earnings dropped for the 11th time on a year-on-year basis due to; a sharp spike in interest costs to service rising debts, higher costs of operations and fall in average revenue per user (ARPU).  The telco owns 95% stake in its infrastructure subsidiary, Reliance Infratel, which it has been trying to sell over the past several quarters with little success. International financial investors, including HSBC Principal Investments, Galleon Group, New Silk Route and Quantum Fund (George Soros) hold the remaining 5%.  A plan to spin-off the infrastructure company in 2008 through an initial public offer (IPO) of about 10% of its share to raise . 6,000 crore was also shelved due to unfavourable market conditions. Last year, a deal to sell a large stake to tower major GTL Infrastructure for $11 billion (. 50,000 crore) fell through, leaving the telco with few options.  Rumours around American Tower Company buying majority stake in Reliance Infratel also emerged in the market leading to a lot of speculation but there was no result. RCOM's separate plan to sell 26% in itself did not yield because the firm found no takers.  "I'll not read into it until it happens," said an analyst with an Indian broking firm who did not wish to be named. "They have got offers in the past. The GTL deal was announced which got cancelled. There was noise on ATC. Every few months there are instances of noise followed by nothing," he added.  A senior executive with a leading tower company recently told ET that consolidation was imminent but mergers and acquisitions would not happen very soon because funding was hard to find and rising interest rates were not helping either. "Everybody is talking to everybody. But these are only talks," the executive said, indicating the lack of serious intent to buy assets.  Analysts add that RCOM's shares have fallen more than 40% this year, becoming the worst performer among benchmark index components while the main index is down just over 10%.