Vodafone may hang up on Indus in $5 billion deal

Sai Jai

5 Jan 2015
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UK’s Vodafone is in the final stages of talks to sell its entire 42% stake in Indus Towers for about $5 billion, raising Bharti Infratel ’s holding in the company to 84% through a share-swap deal.

This key step, leading to a consolidation of ownership, is also expected to revive investor interest in Bharti Infratel, said two sources aware of the ongoing discussions. The negotiations with a KKR-led consortium have been in limbo for months.

Vodafone’s stake is pegged at around $5 billion, said a person aware of the valuation exercise. However, the final number will be an outcome of the impact of tower cancellations that will arise once the different telcos consolidate the overlapping tenancies. Cancellation of tower rentals will significantly hurt operating profits of Indus Towers, which in turn could depress valuations.

Bharti Infratel, a subsidiary of Bharti Airtel, owns 42% in the Indus Towers joint venture. While Idea has a 16% share in it, the residual 42% is held by the UK-based telco. The no-cash transaction, involving a share swap, will see Vodafone getting a smaller pie of the combined Bharti Infratel.

“Both Vodafone and Airtel have run due diligence processes to find the overlap in tenancies and arrive at an accurate valuation,” said one of the two people mentioned above. The findings include around 55,000 telecom tower rentals that overlap between Idea and Vodafone, and around 12,000 among Bharti, Tata Teleservices and Uninor.

Vodafone and Bharti declined to comment. Last year, Vodafone and Idea announced a merger that will create the country’s biggest telecom services company. Bharti has taken over Tata Teleservices’ consumer mobile services and Norway-based Telenor’s Indian arm, Uninor. Along with these mergers comes the sector’s anticipated reduction in infrastructure and people overlaps. Indus Towers had 122,920 telecom towers at the end of June 2017, with 297,867 slots on rent. One way is for shareholders to accept a common number of cancellations, and the other is to pay an upfront fee to Indus Tower.

Vodafone may hang up on Indus in $5 billion deal - ET Telecom
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