Mumbai: KKR and Co. Lp and Canadian state-owned pension fund manager CPPIB’s Rs6,193.9-crore investment in Bharti Infratel Ltd on Tuesday for a 10.3% stake is likely part of a broader arrangement under which the investors are also expected to buy Idea Cellular’s stake in Indus Towers Ltd, two people aware of the discussions said on condition of anonymity.
Indus Towers is the country’s largest telecom tower firm. It’s a three-way joint venture between Bharti Infratel, the tower unit of Bharti Airtel Ltd, Vodafone India Ltd (owning 42% each) and Aditya Birla Telecom Ltd (Idea Cellular Ltd).
Vodafone India and Idea Cellular earlier this month announced a merger agreement that would create India’s largest telecom firm in a $23-billion deal.
Bharti Airtel, which said in October that it would sell a majority stake in its tower unit, informed the stock exchanges earlier this month that it had changed its plans to cede control of the company and may opt for a smaller stake sale instead.
“The decision to not sell a controlling stake was taken when it became clear that Vodafone and Idea were heading towards a merger,” one of the two persons cited above said on condition of anonymity.
“Telecom companies are increasingly realizing that owning tower assets does not add value and the best way ahead is to monetize them while retaining some kind of indirect control,” the person said, adding “there is a distinct possibility that Bharti would offload more stake in future but for now it wants to retain control in both Indus Towers and Bharti Infratel.”
“Bharti has a high level of comfort with KKR as the latter was an investor in Bharti Infratel in the past as well,” the person said.
According to the two people cited above, Bharti has the right of first refusal for a stake sale in Indus Towers and was keen that Idea’s stake is acquired by someone whose interests were aligned with Bharti’s.
“Also, Bharti was not very comfortable with Idea and Vodafone controlling more than 51% stake in Indus Towers post their merger and wanted a financial investor to be brought in,” the person added.
Emails sent to Bharti Infratel, Idea Cellular, Vodafone India and CPPIB did not elicit a response. A KKR spokesperson declined to comment.
With the battle lines drawn between Bharti Airtel, Vodafone-Idea and Reliance Jio Infocomm Ltd, India’s telecom tower firms are seeing increasing investments by large global funds, driving consolidation in this space.
In December, Reliance Communications Ltd (RCom) signed a binding agreement with Canadian alternative asset manager Brookfield to sell a 51% stake in Reliance Infratel for Rs11,000 crore. RCom will continue as an anchor tenant in the tower assets. Reliance Infratel has a portfolio of 45,443 towers and is present in all 23 telecom circles.
this month that Brookfield is vying with American Tower Corp. for wireless tower assets of both Idea Cellular and Vodafone India which could fetch a combined valuation of $1.5 billion.
Vodafone directly owns 10,926 towers that each serve an average of about 1.5 million customers, according to a March investor presentation. Idea has about 8,886 sites, each used by about 1.7 million tenants on average, the report said.