Vodafone India and Idea Cellular — which are slated to merge later in the fiscal — on Monday agreed to sell their tower businesses to ATC Telecom Infrastructure for a combined Rs 7,850 crore.
The Indian subsidiary of American Tower Corp will gain approximately 20,000 towers. The deal is scheduled to be completed by the first half of 2018, subject to regulatory approvals. The sale of tower assets is the first step in deleveraging Idea Cellular’s balance sheet. The tower unit was a non-strategic asset for the Aditya Birla Group company. Idea Cellular’s net debt stood at Rs 54,051 crore as of September 30. “In the event that the completion of the sale of the standalone tower businesses precedes the completion of the proposed merger of Vodafone India and Idea, Vodafone India will receive Rs 3,850 crore ($ 592 million) and Idea will receive Rs 4,000 crore ($ 615 million),” said a statement from the two companies.
The standalone tower businesses of Vodafone and Idea comprise a combined portfolio of nearly 20,000 towers. The tower deal will not affect the merger terms of the two companies. “The receipt of these proceeds prior to completion was anticipated and provided for in the merger agreement and hence would not affect the agreed terms of the Vodafone India and Idea merger, including the amount of debt which Vodafone will contribute to the combined company at completion,” it added.
As part of the transactions, ATC, Vodafone and Idea have established a preferred partner structure under which Vodafone and Idea, given their expanded relationship with ATC, will receive service level and process efficiency benefits and ATC will secure certain preferential rights for future new business commencements on its existing portfolio and on the sites being acquired in certain Indian markets.
Jim Taiclet, American Tower’s Chief Executive Officer, said, “we expect the addition of these two high quality portfolios to be highly complementary to our existing assets and to contribute to long-term leasing growth as India’s leading mobile operators accelerate their 4G network deployments.”
Amit Sharma, American Tower’s EVP and President, Asia and Chairman of the Board, ATC TIPL, said, “we are extremely pleased to partner with Vodafone and Idea to help expand mobile broadband services across Indiawhile furthering our participation in the digital India initiative.” The transactions are expected to generate approximately Rs 2,100 crore in property revenue and approximately Rs 800 crore in gross margin during their first full year in American Tower’s portfolio, at current exchange rates. Further, SG&A associated with the assets is expected to be less than Rs 100 crore for the first year, ATC said.
Earlier this year, Vodafone India and Idea had agreed to merge their operations to create the country’s largest telecom operator worth of more than $ 23 billion with a 35 per cent market share. Vodafone India MD Sunil Sood had earlier said the merger of the two companies was on track for completion in 2018.
The combined entity of Vodafone India and Idea Cellular, which are currently India’s number 2 and 3, respectively, would dislodge Bharti Airtel to counter the bruising price war in the world’s second-largest telecom market. Meanwhile, shares of Idea Cellular on Monday fell nearly 4 per cent after the company posted a loss of Rs 1,106.80 crore for the second quarter this fiscal. The scrip ended at Rs 93.55, down 3.61 per cent on the BSE. During the day, it tanked 5.92 per cent to Rs 91.30.
Idea Cellular had last week said the business was hit by pricing pressure and GST introduction in a “challenging” operating environment. The company had reported a net profit of Rs 91.5 crore in the July-September quarter of the last fiscal.