ATC Sets Ten­ancy Clause for Idea Tower Buy

Move said to be aimed at safe­guard­ing busi­ness as it fears re­dun­dan­cies in tower as­sets if Idea and Voda merge

The Economic Times - - Companies: Pursuit Of Profit - Con­di­tional Deal Kalyan.Par­bat@ times­group.com

ATC is the fron­trun­ner to buy Idea tow­ers at an en­ter­prise value of about Idea along with ICISL, owned tow­ers as of De­cem­ber 31, 2016 Kolkata: Amer­i­can Tower Corp. is open to buy­ing Idea Cel­lu­lar’s cap­tive tow­ers on con­di­tion that In­dia’s third­largest telco guar­an­tees a con­tin­u­a­tion of their ten­an­cies for eight to 10 years and agrees to carry for­ward this clause to the po­ten­tial merged en­tity with Voda­fone In­dia, three peo­ple aware of the mat­ter told ET.

ATC has sought an ad­vance longterm as­sur­ance on ten­an­cies from the Kumar Man­galam Birla-led telco “to safe­guard its busi­ness as it fears there could be nat­u­ral re­dun­dan­cies/over­laps in the com­bined en­tity’s tower as­sets if the Idea-Voda­fone merger hap­pens,” one of the peo­ple said.

There may be an over­lap of 100,000 sites if the Idea-Voda­fone con­sol­i­da­tion goes through, an­a­lysts at JM Fi­nan­cial es­ti­mated.

“Such an as­sur­ance from the Birla side would be piv­otal for the deal to hap­pen with ATC, fail­ing which the en­ter­prise val­u­a­tion of Idea’s largely sin­gle-ten­ancy tow­ers could slip sev­eral notches,” the sec­ond per­son told ET.

An­other top in­dus­try ex­ec­u­tive aware of the dis­cus­sions said Bos­ton-based ATC has sug­gested that “Idea takes on the role of an­chor ten­ant” on its cap­tive tow­ers un­der a long-term master ser­vices agree­ment and en­sures that role con­tin­ues af­ter the prospec­tive merger.

Idea’s man­ag­ing di­rec­tor Hi­man­shu Ka­pa­nia re­cently said the com­pany is open to mon­etis­ing its cap­tive tow­ers held through wholly owned arm Idea Cel­lu­lar In­fra­struc­ture Ser­vices. ATC, one of the world’s largest in­de­pen­dent tower com­pa­nies, is the fron­trun­ner to buy these tow­ers at an en­ter­prise value of about .₹ 4,500 crore, ET re­cently re­ported. Idea along with ICISL, owned 9,838 tow­ers as of De­cem­ber 31, 2016. There were 16,549 ten­ants on these tow­ers at a ten­ancy ra­tio of 1.68, the com­pany said.

MON­ETIS­ING AS­SETS

An ATC spokesper­son said the com­pany “does not com­ment on mar­ket spec­u­la­tion.” Idea did not re­spond to ET’s queries as of press time. UK’s Voda­fone Group and the Aditya Birla Group said on Jan­uary 30 they were in talks to merge Voda­fone In­dia, ex­clud­ing its stake in In­dus Tow­ers, and Idea in an all-share deal that would cre­ate the coun­try’s largest mo­bile phone com­pany by sub­scribers and rev­enue mar­ket share.

Voda­fone Group CEO Vit­to­rio Co­lao has said the merger talks are aimed at cre­at­ing a self-funded In­dian joint ven­ture with equal rights to take on Re­liance Jio In­fo­comm, led by In­dia’s wealth­i­est man, Mukesh Am­bani.

In this con­text, ex­perts said mon­etis­ing tower as­sets would be a top pri­or­ity for Idea as its own­ers may be re­quired to pump in funds to in­crease its 42.45% stake in the com­pany or in the com­bined en­tity to have equal rights in the pro­posed tele­com JV.

Bro­ker­age Credit Suisse re­cently es­ti­mated that the AV Birla group’s req­ui­site eq­uity in­fu­sion into a merged Voda­fone-Idea en­tity could range be­tween $2.4 bil­lion and $3.7 bil­lion to en­sure share­hold­ing par­ity with the UK telco, de­pend­ing on Idea’s stock price.

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