GIC, a sovereign wealth fund established by the Government of Singapore on Tuesday said that it has acquired a 100% stake in a tower company from Reliance Industrial Investments and Holdings Limited. The transaction from GIC was made alongside Brookfield Infrastructure Partners and other co-investors. GIC in return would receive a portfolio of around 135,000 communication towers across India forming the infrastructure backbone of Reliance Jio’s telecommunications network. The transaction value is said to be approximately US$3.4 billion translating to just over Rs 25,000 crore.
Reliance Jio Tower Deal Initially Announced in Late 2019
GIC highlighted that “more towers are planned, increasing the total number of towers in the transaction perimeter to approximately 175,000” resulting in the creation of a “robust telecommunications” network across India.
“The portfolio offers resilient income and long-term value given India’s attractive data demand growth outlook as 4G and smartphone penetration is still very low,” Ang Eng Seng, chief investment officer of infrastructure for GIC, said in a release. “While we remain cautious in this period of high uncertainty, we continue to seek good, long-term opportunities in India.”
GIC said that Reliance Jio is the anchor tenant of the tower portfolio under a 30-year Master Services Agreement resulting in a “secure, long-term source of revenues.”
Crucially, GIC said that the towers were “recently constructed and strategically located” for cellular network coverage across India. It has to be noted that the Indian government in late June, 2020, sanctioned 54 Jio mobile towers targeted at “uncovered rural areas” across Ladakh region under Universal Service Obligation Fund (USOF). The 54 Jio mobile towers are said to be spread across four regions of Ladakh including the Nubra, Leh, Zanskar and Kargil.
In an exchange filing, Reliance Industries said that the “transaction has been completed after obtaining all regulatory approvals.”
Brookfield Infrastructure Partners on Tuesday said that it will be investing US$600 million on its part into the transaction to acquire the Reliance Jio towers.
“We are pleased to have closed this transaction, which was one of our top priorities for 2020,” Sam Pollock, CEO of Brookfield Infrastructure, said in a release. “The acquisition of this large-scale, high-quality telecom tower business significantly expands and diversifies our Data Infrastructure segment and competitively positions us in India’s growing data industry.”
The company said that the portfolio offers a platform for it to “capitalize on the rollout of 5G across the country, as the towers are largely connected by fiber backhaul.”
Brookfield Infrastructure "Confident" About Data Growth in India
Reliance Industries in December 2019 initially announced that it has entered into a binding agreement with Brookfield Infrastructure and its institutional partners. The company said that the binding agreement is for an investment of Rs 25,215 crore.
“We are confident of Brookfield’s abilities to manage this large portfolio of high-quality infrastructure assets and further enhancing value creation opportunities,” Mukesh Ambani, chairman and managing director of Reliance Industries, said in a release in December, 2019.
In early August 2020, Brookfield Infrastructure Partners said that it expected to “shortly” close its acquisition of 130,000 from Reliance Jio. Pollock in August said that the delays in getting the approvals were due to a “mix of a number of factors” including COVID-19. Further, Pollock said that the Indian market can “sometimes be less efficient from a regulatory perspective than others.”
However, Pollock highlighted that the “wireless infrastructure will have to be used extensively” in India due to the low wireline penetration and that the ownership of Jio towers “positions” well for Brookfield Infrastructure.
Anuj Ranjan, managing partner and head of India and Middle East for Brookfield said in a release on Tuesday that the company is “confident” about the long-term prospects for “data sector growth in India.”
“We are looking forward to continuing to work alongside Reliance, which has established itself as a leading telecom and technology company in India,” Ranjan said in a release. “The recent investments by leading global technology companies and private equity investors in Jio is further testimony to the platform Reliance has built and their strength as our anchor tenant.”