Vodafone, Idea to sell tower assets to ATC for $1.2 bn
DEAL DETAILS ATC to get access to around 20,000 towers
NEW DELHI/MUMBAI: Vodafone India Ltd and Idea Cellular Ltd have separately agreed to sell their tower businesses to ATC Telecom Infrastructure Pvt. Ltd for $1.2 billion, or ₹7,850 crore.
Idea Cellular will get ₹4,000 crore and Vodafone India ₹3,850 crore in the event the sale is completed before the proposed merger of the two telecom operators, they said in a joint statement on Monday. ATC Telecom will acquire some 20,000 towers from the two companies.
The sale is intended to bolster the balance sheet of the company formed after the merger of Vodafone India and Idea Cellular’s businesses. A fierce tariff war, triggered by the entry of Reliance Jio Infocomm Ltd in September last year, and heavy spectrum acquisition costs have weakened the finances of operators and ushered in a wave of consolidation in India’s telecom industry.
“The writing on the wall is clear that consolidation will be the driving factor in telecom infrastructure space. Another key takeaway from the deal is that telecom companies will let go of the passive infrastructure in India, which is the case already in many developed telecom markets globally,” said Mridul Mehta, executive vice-president at ICICI Securities Ltd.
The towers sold to ATC Telecom have a combined tenancy ratio of 1.65x as of June 30, the companies said.
“Both Vodafone India and Idea as customers, and AT C TIP Las a mobile network infrastructure provider, have agreed to treat eachotheraslong-termpreferred partners, subject to existing arrangement,” the firms said.
Idea Cellular’s tower assets will be sold to ATC Telecom through the transfer of its entire shareholding in Idea Cellular Infrastructure Services Ltd (ICISL) , the telco said in a separate exchange filing on Monday.
“The sale of the tower assets is happening at an attractive valuation for Idea and Vodafone and is at a premium to the listed trading comparable on a normalised Ebitda basis,” Himanshu Kapania, CEO, Idea Cellular, said. Ebitda is short for earnings before interest, tax, depreciation and am or tis at ion, an indicator of operating profitability.
Bank of America Merrill Lynch advised Idea on the transaction, while Morgan Stanley advised Vodafone India.
Idea and Vodafone’ sm er ger is aimed at dominating a market which billionaire Mukesh Ambani’s Jio has disrupted by offering free voice calls and low data prices.
The Vodafone-Idea combine, which will overtake the current market leader Bharti Airtel Ltd, will have almost 400 million customers with 41% revenue market share. It will have revenue of ₹81,600 crore and an operating profit of ₹24,400 crore. Together, Idea Cellular and Vodafone India havedebtof₹1.08 lakhcrore. The merger is expected to be completed in 2018.
“After Vodafone India and Idea have completed their merger, ~6,300 co-located tenancies of the two operators on the combined stand-alone tower businesses will collapse into single tenancies over a period of two years without the payment of exit penalties,” the companies said.
ICISL reported revenue of ₹596.5 crore and operating profit of ₹193.9 crore in the six months ended September 30, Idea said in its quarterly earnings report.
In addition to the standalone tower business, Idea also owns a 11.5% stake in Ind us Tower Ltd in a three-way joint venture between Idea Cellular (through its Aditya Birla Telecom Ltd unit), Bharti Infratel Ltd and Vodafone India.