Vodafone, Idea to sell telecom tower assets to ATC for $1.2 billion

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New Delhi/Mumbai: Vodafone India Ltd and Idea Cellular Ltd on Monday said that they have separately agreed to sell their standalone telecom tower businesses to ATC Telecom Infrastructure Pvt. Ltd for about $1.2 billion.

The standalone tower businesses of Vodafone India and Idea Cellular are pan-Indian passive telecom infrastructure businesses, comprising a combined portfolio of approximately 20,000 towers with a combined tenancy ratio of 1.65x as of 30 June 2017, the companies said in a joint statement.

The key transactions announced in the telecom tower sector. Graphic: Mint
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“Both Vodafone India and Idea as customers, and ATC TIPL as a mobile network infrastructure provider, have agreed to treat each other as long-term preferred partners, subject to existing arrangements. The parties will work together to further the expansion of high speed mobile networks in India,” the companies said.

“The sale of the company’s standalone business will be achieved through the sale of the entire shareholding of ICISL (Idea Cellular Infrastructure Services Ltd) by the company comprising 60,000 equity shares of Rs10 each to the purchaser,” the Idea Cellular said in an exchange filing on Monday.

Idea and Vodafone are also getting merged with each other, excluding the latter’s 42% stake in Indus Towers Ltd, heralding the creation of India’s largest telecom company in a $23 billion deal. The merger is aimed at dominating a market which billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd has disrupted with free voice calls and low data prices. Reliance Jio, in which Ambani has invested $20 billion, launched its services in September.

The Idea-Vodafone merger will create the world’s second-largest and India’s largest telecom firm, overtaking Bharti Airtel Ltd. It will have almost 400 million customers with 35% customer and 41% revenue market share. It will have revenue of Rs81,600 crore and an operating profit of Rs24,400 crore. Together, Idea Cellular and Vodafone India have a debt of Rs1.08 trillion. The merger is expected to be completed in 2018.

“After Vodafone India and Idea have completed their merger, ~6,300 colocated tenancies of the two operators on the combined standalone tower businesses will collapse into single tenancies over a period of two years without the payment of exit penalties,” the companies said.

In the event that the completion of the sale of the standalone telecom tower businesses precedes the completion of the proposed Idea-Vodafone, Vodafone India will receive $592 million, while Idea will get $615 million.

Mint had reported in February that Idea Cellular was in talks to sell its tower assets in two separate deals thereby marking its complete exit from the tower business in which ATC had emerged the frontrunner to buy around 11,000 standalone towers from Idea. In 2014-15, ICIS reported total income of Rs238 crore, according to filings with the Registrar of Companies.

In addition to the standalone tower business, Idea also owns 16% stake in Indus Tower Ltd, which is a three-way joint venture between Idea Cellular (through its unit Aditya Birla Telecom Ltd), Bharti Infratel Ltd and Vodafone India. Mint had reported that Idea was also in talks to sell its entire stake in Indus to another buyer with the consent of Bharti Airtel. Accordingly, private equity funds KKR and Canadian Pension Plan Investment Board (CPPIB) had emerged as the top contenders.

The sale transfer of independent tower assets is expected to be completed by the first half of calendar 2018 and is subject to necessary regulatory approvals, Idea Cellular said.

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