Reliance Comm plans tower unit IPO - sources

Anil Dhirubhai Ambani group's Chairman Anil Ambani speaks during a news conference in Mumbai December 30, 2008.

MUMBAI (Reuters) - Reliance Communications has revived plans for an initial public offering of its towers unit and could raise up to $900 million for a 10 percent stake, sources with direct knowledge of the deal said.

Reliance Infratel, which operates more than 48,000 telecommunications towers, is likely to file an application for the IPO with India's capital markets regulator this week, two banking sources with direct knowledge of the deal said.

India's IPO market has rebounded since mid-year after an 18-month lull, and Reliance Infratel's IPO could be the second largest this year after NHPC's $1.25 billion offering.

In February 2008, Reliance Infratel filed a regulatory application for an IPO of 10.05 percent stake, which media reports at the time said would be worth more than $1 billion.

It shelved the IPO plan when Indian markets fell.

The company had already raised 14 billion rupees ($290 million) by selling a 5 percent stake to seven investors, including billionaire George Soros and HSBC, in 2007.

JPMorgan, Deutsche Bank, Macquarie, HSBC, UBS, JM Financial, ICICI Securities and Enam Financial are among banks expected to arrange the new Reliance Infratel deal, the sources said.

"Pricing will be very important. If they price it as stiff as Reliance Power then it will be difficult to sell," R.K. Gupta, chief executive of Taurus Mutual Fund said. "Having said that the potential for the tower business is good."

Sister company Reliance Power raised $2.9 billion in early 2008 in India's largest IPO, but the shares have never closed above their issue price.

Reliance Communications and Reliance Power are both controlled by billionaire Anil Ambani. Reliance Communications owns 95 percent of Reliance Infratel.

Reliance Communications, which has 85 million subscribers and wants to reach 100 million by the end of the year, plans to make a placement of shares to institutions at the appropriate time to cut debt, Ambani told shareholders on Tuesday.

Ambani said Reliance Communications, which has spent 400 billion rupees over the last two years, would see a significant decline in capital expenditure this fiscal year.

"Now with the peak of our capex cycle behind us, we are getting ready to reap the full benefits of these in the form of strong cash flows," Ambani said.

The 75 percent rise in India's main share market this year has sparked total equity deals -- including IPOs, placements and institutional sales -- worth nearly $14 billion this year.

Reliance Communications, which the market values at $13.2 billion, closed 0.3 percent up at 307.45 rupees in a Mumbai market that rose 0.9 percent.

The shares have risen 35.3 percent so far this year, lagging the main share index.

Banc of America-Merrill Lynch assigned a rough enterprise value of $13 billion to $14 billion for Reliance Infratel in a research note released in early September.

($1=48.2 rupees)

(Editing by John Mair and Lin Noueihed)

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