‘Viom Ac­qui­si­tion Shows Our Com­mit­ment to the Coun­try’

We are glad we didn’t pay what oth­ers were pay­ing for tower as­sets be­fore

The Economic Times - - Companies - ATC Chair­man

Amer­i­can Tower Corp will ef­fec­tively own 65% in a com­bined en­tity post-merger of ATC In­dia and Viom, ATC chair­man told Deepali Gupta on a day the Cab­i­net ap­proved the deal. The Tatas will own 26%, though the US-based com­pany is will­ing to buy the re­main­ing stake when its part­ners wish to exit. Taiclet said ATC is re­cruit­ing an over­see­ing man­age­ment team to in­te­grate Viom — the largest in­bound ac­qui­si­tion so far this fis­cal year. Edited ex­cerpts.

ON NEW STRUC­TURE Once we close trans­ac­tion, we will have 51% of Viom and 100% of ATC In­dia. The two le­gal en­ti­ties will be sep­a­rate. We are craft­ing a joint team be­tween the two to be the op­er­at­ing man­ager of all those as­sets

Af­ter all the to and fro, what tipped your de­ci­sion in favour of Viom deal? We ad­just the re­turn on in­vest­ment in any coun­try based on its risk pro­file. We also cor­re­late it with US trea­sury bonds and coun­try debt rate. The Viom ac­qui­si­tion shows our com­mit­ment to the mar­ket and the coun­try. What this does to us is re­ally give us a scale where we can well ex­ceed our risk ad­justed re­turn. Also, hav­ing a pres­ti­gious po­si­tion in In­dia gives us ac­cess to as­sets over­lap­ping in other ge­ogra­phies, such as in Europe, there’s Voda­fone. Our ul­ti­mate goal is to be a lead­ing global in­de­pen­dent in­fra­struc­ture op­er­a­tor.

You have more tow­ers in In­dia than even the US. With lower in­come per tower, how do you jus­tify cap­i­tal in­vest­ment? In In­dia, cost of build­ing a tower comes to about $40,000 (each). It used to be $50,000 but height re­quire­ments have changed. Av­er­age cost of set­ting up a tower in the US is $300,000 and so re­turns per tower are in line.

Are you glad you didn’t close a deal in 2010-12 when other higher-priced deals like Air­cel and GTL took place? We are glad we didn’t pay what oth­ers were pay­ing for tower as­sets be­fore that (2012 li­cence can­cel­la­tions). We did a se­ries of ac­qui­si­tions when we en­tered, the big­gest of which was Es­sar’s tow­ers. Yet, we missed out at all of the big op­er­a­tor as­set plays, Air­cel, Re­liance (Com­mu­ni­ca­tions). We were in­volved in early rounds but they did not match our risk ad­justed re­turn pric­ing.

With more such op­por­tu­ni­ties avail­able, is there chance of an­other ac­qui­si­tion here? Given the mag­ni­tude of this ac­qui­si­tion, it will take us a year or two to get busi­ness and le­gal en­ti­ties in­te­grated. We are not nec­es­sar­ily done in In­dia but it will take us two years to de­fine it. What will be the fi­nal ATC struc­ture af­ter the merger? Once we close trans­ac­tion, we will have 51% of Viom and 100% of ATC In­dia. The two le­gal en­ti­ties will be sep­a­rate. We are craft­ing a joint team be­tween the two to be the op­er­at­ing man­ager of all those as­sets. In year I of the in­te­gra­tion plan, there will be a merger of the two le­gal en­ti­ties out­side of day-to-day op­er­a­tions. Once that is com­plete, our own­er­ship will go to 65%, Tatas’ will be 26% and the rest will be with IDFC and Mac­quarie.

What are exit op­tions for Mac­quarie, IDFC and Tatas? Is an IPO on the cards? Tatas made it quite clear at the start that they were in­ter­ested to stay in­volved in this en­deav­our. We are not in­ter­ested in list­ing. At some time we may be­come (in­ter­ested) but there is noth­ing now. Both (Tata and mi­nor­ity share­hold­ers) can sell to us. Their pri­mary exit op­tion will be us. They will let us make an of­fer and then they can look to see if they can do bet­ter. There­after they can sell to any­one.

In the US, ATC has REIT sta­tus. Will you try for it in In­dia too? REIT sta­tus is a tax se­lec­tion not a com­pany strat­egy. At some point in the fu­ture, our strat­egy is to scale up dra­mat­i­cally, merg­ers or not, con­sol­i­date that, cre­ate sales on that. Once we have that, we will de­ter­mine what tax strat­egy to adopt. We will con­sider it (con­vert­ing the In­dian en­tity into a REIT) as part of strat­egy, but that is not a gov­ern­ing as­pect.

Is there a plan to delever­age Viom or com­bined In­dian ATC? We will in­te­grate ATC, Viom debt in our en­tire cap­i­tal struc­ture. The over­all tar­get is to take debt to three to five times the EBITDA for the en­tire com­pany. In­dia’s debt po­si­tion fits in that and we won’t have to slice debt in In­dia be­cause it is part of the global piece.

It will be a func­tion of cost of debt in ab­so­lute terms and how much. In In­dia, it is at 1112%, com­pared with high sin­gle dig­its in the US and around 18% in Africa. We will also see if bank­ing with ATC can help re­fi­nance this debt to a lower cost.

Will you look to re­fi­nance from In­dian lenders or in­ter­na­tional bor­row­ings? We will be tar­get­ing lo­cal debt as we will want lo­cal cur­rency ex­po­sure. It is one of the many nat­u­ral hedges to cur­rency changes.

James Taiclet

BHARAT CHANDA

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