Airtel moving into a new line of business as Bharti Infratel to merge with Indus Towers

By Saisumit

Bharti Infratel and Indus Towers are planning a merger this year. The news that first aired in November last year is expected to be realised this summer. Earlier, it was expected that Bharti Infratel, a subsidiary of Bharti Airtel, will take over the entire Indus Tower Business and buy out the stakes held by Vodafone, Idea and US-based private equity fund Providence which own 42%, 11.15% and 4.85% of the company, respectively.

In a statement, the company declared that it “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.” According to this plan, Bharti Infratel is to acquire the stake it does not yet 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 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.

Set to become India’s largest telecom

The move is proof of the strength of the merger that is already underway between Vodafone and Idea Cellular. Together, these companies will be India’s largest telecom operator, overtaking Airtel. Idea, which has already raised 6750 crores by a preferential share issue of Aditya Birla Group, is set to combine operations with Vodafone India, which has also invested Rs 6750 Crore. This investment is in addition to 8400 crores Vodafone made from savings in operational and capital expenditure.

Airtel was looking for a complete buyout, as that would have given the company a commanding position in deciding rentals and monetising its tower business. With Indus owning 1,23,073 mobile towers, a buyout deal would have made the telecom business about two times the size of its nearest rivals, Bharat Sanchar Nigam Ltd, which has 66,000 towers, and American Tower Corporation, which controls about 60,000 towers. Nonetheless, the new deal will give Airtel more control over the tower business compared to its previous 42% stake in the company.

The deal holds out the prospect of greater rewards for Vodafone and Idea Cellular. The tower business alone will help them build on their $23-billion merger and place them in a better market position against competitors like Jio and Airtel, which have dominated the market up until now.


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