RCom Of­fers Lenders 51%

The Economic Times - - Front Page -

Kolkata: Bharti In­fratel, In­dia’s sole listed telecom tower com­pany, is ex­plor­ing a mega stake ac­qui­si­tion in larger peer In­dus Tow­ers that could be the largest con­sol­i­da­tion move in the in­dus­try.

“The board of di­rec­tors of Bharti In­fratel in their meet­ing held on Oc­to­ber 30 has de­cided to ex­plore and eval­u­ate ac­qui­si­tion of stake in one or more tranches in In­dus Tow­ers, with the aim of mak­ing it a sub­sidiary or wholly owned sub­sidiary of Bharti In­fratel,” the tower arm of Su­nil Mit­tal-led Bharti Air­tel said in a stock ex­change fil­ing on Mon­day af­ter mar­ket hours.

Bharti In­fratel is likely to shortly con­sti­tute a board­level com­mit­tee to ex­am­ine the In­dus stakeac­qui­si­tion op­por­tu­ni­ties, said a per­son with di­rect knowl­edge of the mat­ter. The com­pany, how­ever, has not in­di­cated any im­me­di­ate time­line on a po­ten­tial deal clo­sure or fi­nan­cial de­tails.

Ma­jor­ity owned by In­dia’s largest telco Bharti Air­tel, Bharti In­fratel al­ready holds 42% of In­dus Tow­ers, which is among the largest wire­less in­fra­struc­ture com­pa­nies in the world with 123,000 tow­ers. The re­main­ing shares in In­dus are held by Voda­fone In­dia (42%), Idea Cel­lu­lar (11.15%) and Prov­i­dence Eq­uity Part­ners (4.85%). In­fratel on its own runs 39,264 tow­ers. RCom has pre­sented a fresh plan to its lenders, un­der which banks could con­vert some of its debt and take 51% stake in it.

Bharti In­fratel and In­dus com­bined cur­rently run nearly 41% of the to­tal tow­ers in In­dia and ac­count for 49% of co-lo­ca­tions.

Bharti In­fratel shares rose 2.52% to close at .₹ 429.90 on the BSE on Mon­day.

ET, in its Oc­to­ber 11 edi­tion, had re­ported that Bharti In­fratel could buy out all or most of the 58% share­hold­ing of other part­ners — Voda­fone In­dia, Idea Cel­lu­lar and Prov­i­dence Eq­uity Part­ners — in In­dus Tow­ers, in what was likely to be the first stage of a two-part deal.

ET fur­ther re­ported that the se­cond stage was likely to see a con­sor­tium led by US buy­out fund KKR, and in­clud­ing Canada Pen­sion Plan In­vest­ment Board (CPPIB), Abu Dhabi In­vest­ment Author­ity and GIC Singapore ac­quire an In­dus-Bharti In­fratel com­bined en­tity for $11 bil­lion.

Voda­fone is likely to re­tain an 8-10% stake to en­joy any fu­ture up­side. In­fratel has the right of first re­fusal on the stakes of Voda­fone and Idea in In­dus Tow­ers, ET had re­ported.

A per­son fa­mil­iar with the mat­ter said Bharti Air­tel, at its board meet­ing on Tues­day, may con­sider Air­tel’s sale of its stake in In­fratel to the KKR-led con­sor­tium.

As per the lat­est share­hold­ing fig­ures, Bharti Air­tel con­trols 58% in Bharti In­fratel while KKR-CPPIB owns 10.33% af­ter its $952mil­lion in­vest­ment made in March this year when it bought some of Air­tel’s stake. The re­main­ing In­fratel stake is held by pub­lic share­hold­ers. Even­tu­ally, Bharti Air­tel is likely to exit its resid­ual stake to delever­age its bal­ance sheet, which had net debt of .₹ 87,840 crore ($13.5 bil­lion) on March 31. The cur­rent mar­ket cap of Bharti In­fratel is .₹ 79,515 crore. In Au­gust, Bharti Air­tel had sold a 3.65% stake in In­fratel for .₹ 2,570 crore at about .₹ 380 per share.

Voda­fone In­dia and Idea, the coun­try’s se­cond and third-largest tel­cos, which are in the process of merg­ing their busi­nesses to cre- ate In­dia’s largest phone com­pany, are known to be look­ing to sell off their stakes in In­dus along with their stand­alone tow­ers to strengthen their com­bined bal­ance sheet to bet­ter take on com­pe­ti­tion from both Bharti Air­tel and new­comer Re­liance Jio In­fo­comm.

The lat­est tower sec­tor con­sol­i­da­tion over­tures co­in­cide with big-ticket con­sol­i­da­tion al­ready un­der­way in the telecom in­dus­try that is ex­pected to leave Bharti Air­tel, the Voda­fone In­dia-Idea com­bined en­tity and Jio as the only three strong pri­vate tel­cos. Ex­perts see Bharti In­fratel as the most likely buyer of the Voda­fone and Idea stakes and in turn con­sol­i­date In­dus un­der the listed tower com­pany con­trolled by the coun­try’s lead­ing telecom ser­vice provider Bharti Air­tel. More so given Bharti In­fratel’s strong net cash re­serves of over .₹ 4,400 crore, es­pe­cially since data growth re­quires capex-in­ten­sive fi­bre roll­outs. In­fratel has free cash flow of over .₹ 12,000 crore.

Voda­fone is likely to re­tain an 8-10% stake to en­joy any fu­ture up­side


Bharti In­fratel’s plans to buy In­dus came on a day it re­ported a 17% on-year drop in net profit in the fis­cal se­cond quar­ter, hit by a slump in fi­nance in­come and higher costs, mainly on rent and fuel. Bharti In­fratel’s con­sol­i­dated net profit for the July-Septem­ber pe­riod was .₹ 638 crore.

Net fi­nance in­come crashed to .₹ 10.9 crore, from .₹ 247.2 crore a year ear­lier. Con­sol­i­dated rev­enue, in turn, rose 11% on a like-to­like ba­sis to .₹ 3,648 crore, the com­pany said in a state­ment on Mon­day.

Bharti In­fratel said it sees an up­side in in­creased net­work in­vest­ments an­nounced by car­ri­ers and from the gov­ern­ment’s smart cities pro­gramme which will al­low net­work providers to cre­ate us­able in­fra­struc­ture.

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