RCom Offers Lenders 51%
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
NET PROFIT FALLS
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.