Bharti Airtel agreed a deal to combine its tower business Bharti Infratel with Indus Towers, a move it said will create the world’s largest tower company outside of China, with an enterprise value of INR965 billion ($14.4 billion).
In a stock exchange filing, Airtel said the combined company will operate 163,000 towers across India. It will operate under the Indus Towers name and will continue to be listed on the Indian stock exchanges.
Airtel and Vodafone will jointly control the combined company.
The deal is subject to regulatory and other approvals and is expected to close before the end of the financial year ending 31 March 2019.
Infratel holds a 42 per cent stake in Indus Towers, one of the largest tower companies in the world. The remaining shares in Indus are held by Vodafone India (42 per cent), Idea Cellular (11.15 per cent) and Providence Equity Partners (4.85 per cent).
At the end of 2017, Infratel owned and operated 39,363 towers with 92,211 co-locations in 11 service areas, while Indus operated 122,962 towers with 288,727 co-locations in 15 areas. The companies had combined revenue of INR253 billion in the financial year to 31 March 2018.
Vodafone will be issued with 783.1 million new shares in the company in exchange for its 42 per cent holding in Indus.
The merger gives Idea the option to sell its stake in Indus for INR65 billion or receive new shares in the combined company based on the merger ratio. Providence was given the option to receive cash or shares for 3.35 per cent of its 4.85 per cent shareholding in Indus, with the balance exchanged for shares.
Local media reported in October 2017 Infratel was looking to acquire either most or all of the 58 per cent stake in Indus it didn’t own. The move was expected to cost $5.5 billion to $6.5 billion and be conducted as “a leveraged buyout that will largely be funded out of the reserves and cash flow of Indus Towers”.
If the purchase moved ahead, a consortium led by US private equity company KKR was set to increase its interest in Infratel from 10 per cent to around 45 per cent, becoming the single largest shareholder in a move which would have shaken up India’s infrastructure market.
At the time, KKR faced competition from Canada-based Brookfield Asset Management, which was also pursuing Indus after a tower deal with Reliance Communications fell through.
Infratel reported a 1.5 per cent year-on-year increase in net profit for the January-March period to INR6.06 billion, on consolidated revenue of INR36.6 billion, up 4 per cent from the comparable 2017 period.
Consolidated revenue for the fiscal year ending 31 March rose 8 per cent year-on-year to INR144.9 billion.