ATC seeks merger of India units ahead of Vodafone, Idea tower deals

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New Delhi/Mumbai: American Tower Corp. (ATC) has sought approval from the department of telecommunications (DoT) to merge its five Indian subsidiaries with another arm, ATC Telecom Infrastructure Pvt. Ltd, ahead of its purchase of 20,000 standalone telecom towers of Idea Cellular Ltd and Vodafone India Ltd for $1.2 billion.

The proposal is in the “final stages of consideration”, said telecom secretary Aruna Sundararajan.

“They (American Tower) are asking for a two-stage approval,” Sundararajan told Mint. In the first stage, they will merge the five entities under ATC Telecom Infrastructure. Then they plan to infuse $1.2 billion, she said.

The merger will increase ATC’s stake in the resultant merged entity, which requires government approval under current norms on foreign direct investment (FDI).

“From 49% they (ATC) have to be allowed to increase it, which is what we will do now and then the money ($1.2 billion) will come,” said Sundararajan.

ATC India Tower Corp. Pvt. Ltd, ATC Tower Co. of India Pvt. Ltd, McCoy Developers Pvt. Ltd, Transcend Infrastructure Pvt. Ltd and ATC Telecom Tower Corp. Pvt. Ltd are the five subsidiaries that are proposed to be merged with ATC Telecom Infrastructure, a person aware of the development said, requesting anonymity.

ATC did not reply to an email seeking comment.

Vodafone India and Idea Cellular had in November separately agreed to sell their respective standalone telecom tower businesses in India, totalling 20,000 towers, to ATC Telecom Infrastructure for around Rs7,850 crore ($1.2 billion).

This deal was announced after the country’s second and third-largest telecom operators announced a merger in March under which both outlined a plan to sell their individual standalone tower businesses to strengthen the balance sheet of the combined entity, which would become the largest telecom operator in India. The companies expect to complete the merger in the first half of this calendar year.

Together, the companies would be in a stronger position to take on competition from newcomer Reliance Jio Infocomm Ltd, which disrupted the sector with free services in September 2016 and later announced cheap tariffs which dealt a blow to revenue streams of incumbent operators.

If the completion of sale of their standalone tower businesses precedes the completion of the merger between Vodafone and Idea, then they will receive Rs3,850 crore and Rs4,000 crore, respectively.

Currently, though the government allows 100% FDI in telecom, only investments up to 49% can be done under the automatic route. Anything beyond that requires government approval.

The ATC merger might also require clearance from the ministry of home affairs, another person aware of the development said, requesting anonymity.

ATC operates over 58,000 tower sites throughout the country. Its nearest rival in India is Bharti Infratel Ltd, which has a consolidated portfolio of over 91,000 telecom towers, which includes over 39,000 of its own towers and the rest from its 42% equity interest in Indus Towers. Bharti Infratel and Vodafone India hold 42% stake each and Idea Cellular owns 11.15% stake in Indus Towers, which has 1.2 lakh towers in the country.livemint