Tatas get window to exit ATC Telecom

Tata Teleservices may exit ATC Telecom Infrastructure Pvt Ltd (ATC TIPL), formerly Viom Networks Ltd, by selling its residual stake to controlling shareholder Boston-based real estate investment trust American Tower Corporation (ATC) after April 1, 2018.

ATC had completed the acquisition of a 51% controlling ownership interest in Viom Networks in April 2016 by spending approximately $1.1 billion in cash.

Post-deal, Tata Teleservices Ltd (TTSL) and Tata Sons Ltd (TSL) held approximately 33% and 2% minority interests, respectively in Viom, ATC said in October 2017. If the previous $1.1-billion 2016 valuation for a 51% stake is taken as a yardstick, then a sale of 33% will mean a deal size of over $700 million. It may be noted the 51% stake sale included a cash payment of approximately Rs 7,600 crore, but ATC also assumed approximately Rs 5,100 crore in existing rupee-denominated debt.

Last year, Tata Teleservices informed the Department of Telecommunications in India of its intent to exit the wireless telecommunications business and announced plans to transfer its business to another telecommunications provider, Bharti Airtel. Airtel's acquisition of the Tata conglomerate's consumer mobile business was virtually free of charge.

In connection with the Viom acquisition, ATC, through one of its subsidiaries, entered into a shareholders agreement with Viom and the remaining Viom shareholders: Tata Sons, Tata Teleservices, IDFC Private Equity Fund III, Macquarie SBI Infrastructure Investments Pte and SBI Macquarie Infrastructure Trust.

The shareholders agreement provides for, among other things, put options held by certain of the remaining shareholders, which allow the remaining shareholders to sell outstanding shares of ATC TIPL, and call options held by ATC, which allow the ATC to buy the non-controlling shares of ATC TIPL.

As per the initial shareholders' agreement, at any time during the First Put Period (a period of 90 days commencing from April 1, 2018) each of TTSL and TSL have the right to require ATC to buy up to 50% of the shares then held by the Tatas in ATC TIPL.

Also, at any time during the second put period (a period of 90 days commencing from April 1, 2019) TTSL and TSL have the right to require ATC to purchase up to 100% of the shares then held by the Tatas in ATC TIPL.

"The put options may be exercised, requiring the company to purchase the remaining shareholders' equity interests, on specified dates beginning April 1, 2018, through March 31, 2021. The price of the put options will be based on the fair market value of the exercising remaining shareholder's interest in the company's India operations at the time the option is exercised. Put options held by certain of the remaining shareholders are subject to a floor price of 216 INR per share," ATC told shareholders in its latest 10-K annual form.

Emails sent to Tata Teleservices spokesperson on whether the company is now considering exercising its put option did not elicit any response.

A media query sent via the ATC corporate website seeking comment on whether any shareholder had approached them to exercise the put option also did not elicit any response.

Macquarie SBI Infrastructure Investments Pte, SBI Macquarie Infrastructure Trust and IDFC Private Equity Fund III also continue to retain certain interests in ATC TIPL.

The stake math

• If the previous $1.1-billion 2016 valuation for a 51% stake is taken as a yardstick, then a sale of 33% will mean a deal size of over $700 million
• The 51% stake sale included a cash payment of around Rs 7,600 crore, but ATC had also assumed Rs 5,100 crore in existing rupee-denominated debt