Bharti Infratel, Indus Towers set to merge

New Delhi: In a major consolidation in the tower business, Bharti Infratel and Indus Towers on Wednesday agreed to merge their businesses to create a $14.6 billion company with world’s second largest number of mobile towers.

The merger will create a pan-India tower firm, with over 1.63 lakh towers, operating across all 22 telecom service areas in India, will be lagging only behind China Tower.

Indus Towers is currently jointly owned by Bharti Infratel (42 per cent), Vodafone (42 per cent), Idea Group (11.15 per cent) and Providence (4.85 per cent). Bharti Airtel owns 53.50 per cent in Bharti Infratel.

Bharti Airtel and Vodafone will jointly control the merged entity. Idea Cellular and Providence Equity Partners, will have an option to cash out.

Vodafone and Idea had flagged they would look at selling their stakes in Indus and other tower assets they separately own to help cut debt for the merged telecoms carrier. The merger will help unlock value for the telecom companies which are locked in a tariff war unleashed by Reliance Jio that has hurt earnings and triggered consolidation in the sector.

The transaction values Indus Towers at an enterprise value of Rs 71,500 crore ($10.8billion). The merger ratio is 1,565 shares of Bharti Infratel for every 1 Indus Towers share.  Idea has the option of selling its 11.2 per cent stake in Indus for about $1 billion or receiving new shares in the combined firm.

Providence has the option to receive cash or shares for 3.35 per cent of its 4.85 per cent holding in Indus, with the remainder exchanged for shares in the combined firm. If Idea decides to sell all of its stake and Providence sells 3.35 per cent of its 4.85 per cent shareholding, the new entity will be 37.2 per cent owned by Bharti Airtel and 29.4 per cent by Vodafone, while 1.1 per cent will be with Providence and the rest by public shareholders.

In case both Idea and Providence decide to continue to stay invested, Bharti Airtel would have a shareholding of 33.8 per cent in the combined entity. Vodafone, in such a scenario, would have 26.7 per cent while Idea  would get 7.1 per cent and Providence would have 3.1 per cent holding. The remaining 29.3 per cent would be with public.

Indus Towers currently operates in 15 telecom service areas and Bharti Infratel’s operations are focused on the remaining 7 circles.

The merger will create a pan-India tower firm, with over 1.63 lakh towers, operating across all 22 telecom service areas in India, will be lagging only behind China Tower.
Bharti Airtel and Vodafone will jointly control the merged entity.
Idea Cellular and Providence Equity Partners, will have an option to cash out.
The merger will help unlock value for the telecom companies which are locked in a
tariff war.