November 22nd, 2005 - Mumbai
GTL board okays 1:1 swap for demerger into GIL - Times News Network

Mumbai-based network engineering services company GTL's board has approved a swap ratio of 1:1 for the demerger of all its telecom and network-related infrastructure business to GTL Infrastructure (GIL).

Existing GTL shareholders will get one share in the demerged GIL. Swiss fund Telecom Infrastructure Fund will pick up 26% in GIL for Rs 10 per share. GTL shareholders will hold 33% through the swap ratio of 1:1 and GTL will hold 41%.

The equity capital of GIL is Rs 27 crore (100% subscribed by GTL). GTL will made a further investment of Rs 106 crore in the equity at Rs 10 share. GIL shares are expected to be listed on the stock exchanges soon.

GTL has been undergoing a massive restructuring over the past couple of months. The objective is to focus on the core competencies. The company is also planning to utilise some of its cash to reduce its debt and bank loans.

Infrastructure assets of Rs 214 crore comprising data centres, international gateways, VPN, operating systems for billing, HR & CRM have been transferred by GTL to GIL for cash.

GIL will now become a pure play telecom infrastructure company, while GTL will continue designing and building telecom networks for basic and cellular companies.

GIL's business is expected to be capital-intensive as the company will build telecom networks for GSM and CDMA operators. GIL will also build, operate and own infrastructure for BPO companies.

GIL will focus on wireless infrastructure management which is emerging as a major business opportunity.

One of the problem cellular operators face is that they have to acquire rooftops in building which are already crowded with equipment of rivals.

While the DoT has allowed the sharing of infrastructure among telecom companies, it has not taken off as there are no independent companies to provide this service.

GIL will invest in acquiring these sites and then work on leasing and sharing it with multiple operators to get synergy of operations. companies like American Tower and Crown Castle in US carry on such business.

According to company officials, GTL Company is trying to improve the return on capital employed and hiving off the telecom assets into another company is expected to help in this regard.