After CDMA major Reliance Communications and GSM mobile player Spice, it’s the turn of the wireless telephony leader Bharti to divest stake in its tower company.
Pays $1 bn for 8-10% stake, values Bharti Infratel at $10-12.5 bn
NEW DELHI: After CDMA major Reliance Communications and GSM mobile player Spice, it’s the turn of the wireless telephony leader Bharti to divest stake in its tower company. A clutch of international investors, led by Singapore’s Temasek Holdings, has put in $1 billion in Bharti Infratel, a wholly-owned subsidiary of Bharti Airtel, a company statement said on Friday.
Besides Temasek, other investors include Investment Corporation of Dubai, Goldman Sachs, Macquarie, AIF Capital, Citigroup and India Equity Partners. Temasek has a majority holding in SingTel, which in turn has about 30% stake in the Bharti group.
The international investors are believed to have picked up around 8-10% stake in Bharti Infratel, but the company statement is quiet on that. The enterprise valuation of Bharti Infratel has been agreed to be in the range of $10-12.5 billion, the company said. However, the final valuation “would be determined on the basis of Bharti Infratel’s actual operating performance in the financial year 2008-09,” the statement said.
Top officials of Bharti have often said that the group would like to hold only a minority stake in the tower company over a period of time. The equity dilution model works very well in the tower business as this is a capital-intensive business. While financial investors offer capital for the infrastructure needed in the business, strategic investors can help in the operation of tower companies, experts said.
Earlier this week, Spice, which operates mobile services in Karnataka and Punjab, announced that it got the board approval to sell its tower business. It is believed that Spice’s tower business may be sold to Quipo Infrastructure, an independent infrastructure company, for around Rs 600 crore.
Also recently, Reliance Communications divested 5% in its tower company to a group of seven institutional investors. At that point, the equity valuation of Reliance Telecom Infrastructure (RTIL), the towerco of Reliance Communications, was $6.75 billion and enterprise value was $8.25 billion.
Bharti Infratel owns around 20,000 sites and holds 42% stake in Indus Towers, the recently announced joint venture between Bharti, Vodafone and Idea, which has over 70,000 sites. “Bharti Infratel and Indus Towers will provide passive infrastructure services to all wireless telecom operators in India on a non-discriminatory basis,” Bharti said. “Sharing of passive infrastructure results in capex and opex savings and higher capital efficiency for all wireless operators, enabling quicker roll out of services especially in rural areas, thus benefiting millions of people across India,” the company added.
According to a study paper from the Enam group, “Players would resort to tower sharing for cost and capex savings.” According to industry experts, pooling of telcos’ tower assets is a positive sign for the industry. According to a report prepared by IDFC-SSKI, such a move would “bring sanity to the tower industry and pre-empt over-supply”.
Industry estimates suggest that around 4.07 lakh telecom towers are expected in India by 2009-2010 to cater to over 450 million mobile phone users. Currently, there are around 220 million mobile users in India. Of the 4.07 lakh towers, 3.59 lakh will be shareable. The projection for base transceiver stations (BTS) is 4.8 lakh by 2009-2010. A BTS installed on a telecom tower is referred to as a tenant. Going by the projection for fiscal 2010, there would be a tenancy of 1.34 on the shareable towers.
Cost of setting up a tower or a cell site costs around Rs 30 lakh, according to industry experts. So, an investment of Rs 66,000 crore is required to set up another 2.2 lakh towers in India over the next three years or so, COAI director general T V Ramachandran said recently.
Currently in India, there are 1.2 lakh towers and 1.36 lakh BTSs of different mobile phone companies. Bharti has the largest number of towers at around 40,000. Each BTS can, on an average, cater to around 1,000 mobile phone subscribers.
m_nivedita@dnaindia.net
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