The mega merger in the telecom tower space of Rs.50,000 crore ($11 billion) between Anil Ambani's Reliance Infratel (R-Infratel) and Manoj Tirodkar's GTL Infrastructure has been called off as both sides failed to reach an agreement.

GTL Infra's Board of Directors had earlier given an in-principle approval for the merger of Reliance Infratel Ltd's tower assets into the Company.

But, after a careful review, the Committee of Directors in their meeting held on September 6, has conveyed that the Non-Binding Term Sheet signed by both parties dated June 27, expired on August 31.

Subsequently, despite efforts, both parties have neither extended the Term Sheet nor entered into any definitive transaction agreements as envisaged therein. Consequently, the process of merger as originally contemplated would not take place.

The news comes as talks between Anil Ambani's Reliance Communications, the parent of R-Infratel which is looking to dilute a 26% stake, and Etisalat have also not progressed much further.

Transaction Reference: The Hindu

The deal between R-Infratel and GTL if done, would have created the world's largest passive telecom infrastructure company with over 80,000 towers (GTL's - 32,500 towers an R-Infratel's 50,000 towers).

The cash component of the deal, which would have helped RCom cut its debt, did not work out. RCom's net debt increased to Rs.28,500 due to 3G auctions from Rs.19,889 crore of net debt at the end of March 2010.

"Reliance Communications Ltd is now engaged in discussions with certain other strategic and financial investors, to pursue a similar transaction aimed at significant reduction in the Company's debt and unlocking of value for RCOM shareholders from the passive infrastructure and related assets in its 95% owned subsidiary, Reliance Infratel Ltd," said RCom in a statement. "Owing to the provisions of mutual confidentiality agreements, RCOM cannot provide any comment on the reasons for the inability to conclude a transaction with GTL Infrastructure Ltd," it added.

In September last year, Reliance Infratel, filed papers for an initial public offering (IPO) to raise up to $1 billion. Following Reliance Communication's agreement with GTL, the IPO plan was called off.

Recently, Anil's elder brother Mukesh also forayed into the telecom space with the acquisition of 95% stake in Infotel Broadband, which holds broadband rights in all 22 states.

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