Voda, Idea to sell tower assets to ATC for Rs 7,850 crore

Vodafone India and Idea Cellular on Monday said they will sell their tower assets to America Tower Corp (ATC) for a total consideration of Rs 7,850 crore.

Both the telecom companies are in the process of merging their operations, which is expected to be completed next year and will displace Bharti Airtel as country's largest telecom operator.

If the tower deal goes through prior to their merger, Idea Cellular would get Rs 4,000 crore and Vodafone Rs 3,850 crore.

"The standalone tower businesses of Vodafone India and Idea are pan-Indian passive telecommunication infrastructure businesses, comprising a combined portfolio of approximately 20,000 towers with a combined tenancy ratio of 1.65x as of 30 June, 2017", both the companies said in a joint statement.

"Both Vodafone India and Idea as customers, and ATC as a mobile network infrastructure provider, have agreed to treat each other as long-term preferred partners, subject to existing arrangements. The parties will work together to further the expansion of high-speed mobile networks in India," it added.

The sale transfer of independent tower assets is expected to be completed by the first half of calendar 2018 and is subject to necessary regulatory approvals, Idea Cellular said.

After Vodafone India and Idea complete their merger, 6,300 company-located tenancies of the two operators on the combined standalone tower businesses will collapse into single tenancies over a period of two years without the payment of exit penalties.

The receipt of the proceeds from the sale of towers, prior to completion of the merger, was anticipated and provided for in the merger agreement, and hence, would not affect the agreed terms of the the Vodafone India and Idea merger, including the amount of debt which Vodafone will contribute to the combined company at completion.

For ATC, the deal strengthens its position in the Indian market. The American company had earlier acquired a controlling stake in Viom Networks.

Idea, through its unit Aditya Birla Telecom Ltd, holds a 16% stake in Indus Tower Ltd, which is a three-way joint venture between Idea Cellular, Vodafone India and Bharti Infratel Ltd. Vodafone has a 42% stake in the firm.

In a statement, American Tower's CEO Jim Taiclet 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."

The transactions are expected to generate approximately Rs 2,100 crore ($320 million) in property revenue and approximately Rs 800 crore ($120 million) in gross margin during their first full year in American Tower's portfolio, at current exchange rates, the ATC statement said.

The entry of Reliance Jio in the telecom sector has led to a wave of consolidation as the financials and margins of existing players have come under immense pressure.

...& ANALYSIS

• If the tower deal goes through prior to their merger, Idea Cellular would get Rs 4,000 crore and Vodafone Rs 3,850 crore
   
• The sale transfer of independent tower assets is expected to be completed by the first half of calendar 2018
   
• For ATC, the deal strengthens its position in the Indian market. The American company had earlier acquired a controlling stake in Viom Networks