India's Reliance Communications (RCom) and GTL Infrastructure have called off a $9 billion deal to merge their tower assets, leaving the telco searching for new means of reducing its hefty debt.
RCom had planned to sell its 50,000 towers to GTL to create an $11 billion giant with 80,000 towers, but the merger collapsed after both parties let the term sheet for the deal expire.
RCom had been relying on the sale to help wipe out its $7 billion debt, which at a net debt to ebitda ratio of 4.5 times is two-thirds higher than its closest competitors, FT.com said.
The deal was expected to have shaved RCom's debt in half, sources told the Economic Times. But an investment analyst told the paper that the move was not surprising because the deal was overvalued.
In a statement, RCom said it was “now engaged with certain strategic and financial investors to pursue a similar transaction aimed at significant reduction in the company's debt.”
Barring another M&A deal, RCom will have to either pursue an IPO of its 95%-owned tower unit, Reliance Infratel, or find another means of raising capital.
The deal was also aimed at making the company a more attractive target for those operators, such as Etisalat, which are in talks to buy 26% of RCom.