By Sumit Vohra
Bharti Infratel and Indus Towers are planning for a merger this year. The news that first aired in November last year is expected to be realized this summer with Infratel merging with Indus Tower Business. Earlier it was expected that Bharti Infratel, a subsidiary of Bharti Airtel will take over the entire Indus Tower Business and buy out stakes from Vodafone, Idea and US-based private equity fund Providence which own a 42%, 11.15%, 4.85% respectively.
The merger
The board of directors of Bharti Infratel Ltd, in its meeting held on October 30, has decided to explore and evaluate the acquisition of a stake in one or more tranches in Indus Towers Ltd with the aim of making it a subsidiary or wholly owned subsidiary of Bharti Infratel Ltd, the company said in a statement.
According to the plan, Bharti Infratel was to acquire the stake it didnt own in Indus Towers in an all-cash transaction and later sell the combined business to external investors.
Both Vodafone and Idea wanted cash from the deal; now they want to stay invested in their tower business as they expect the valuation of the business to go up in the near term. Also, the companies do not need cash at the moment, said a person aware of the matter.
Overtaking Airtel Indias as India’s largest telecom
The move also comes as a proof of the cash-strength of an already going merger between Vodafone and Idea Cellular which is going to make them Indias largest telecom operator overtaking Airtel. Idea which has already raised Rs 6750 crores by preferential share issue of Aditya Birla Group is all set to combine operations with Vodafone India which has also invested Rs 6750 crore in addition to Rs 8400 crores from savings in operational and capital expenditure. The new deal will avoid its complete loss of stake in tower business as well as help them grow the expanded telecom business.
How does Airtel gain?
Though Airtel was looking for a complete buyout as it would have given it a commanding position in deciding rentals and monetizing the tower business, with Indus owning 1,23,073 mobile towers the deal would have made the telecom about two times the size of its nearest rivals, Bharat Sanchar Nigam Ltd, with 66,000 towers, and American Tower Corporation, which controls about 60,000 towers. Nonetheless, the new deal will fetch Airtel more control over the tower business as compared to its earlier 42% stake in the company.
Who is the biggest benefactor?
The deal surely hangs more fruits for Vodafone and Idea Cellular. The tower business will help them expand their $23-billion merger and place them better against competitors like Jio and Airtel which have dominated the market till now.
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