Manoj Tirodkar, a first generation entrepreneur and the chairman of GTL Infra is a busy man. In just two decades, not only has he emerged as a leading telecom infrastructure player in India but with Reliance Infratel and GTL merging its tower business, he will become the largest independent telecom tower provider in the whole world. Barely 24 hours after the deal, he spoke exclusively to Business Standard’s Arijit Barman & Katya Naidu about the different aspects of the transaction.
Q: How did it all begin?
Ans: Our vision has always been to be an extremely large infrastructure provider in the passive tower space and we have been talking to almost all the key players in the sector. Some of them approached and some we approached. For us, the important point was we have been working with RCom for some time. The partnership on the front of being a network service provider from our side has been going very smoothly. I found that Mr Anil Ambani is someone who shares the vision and more importantly he is usually committed to basically working towards an objective that India as a whole needs shared infrastructure and also found someone in him, who wanted to basically has get a substantial value for his shareholders. Thirdly what I saw is that whether active or passive he strongly believed that only through open dialogue and neutral platform can sharing be encouraged. So first of all there was meeting of minds.
Secondly my own shareholding is 56 per cent at present. Post Aircel our shareholding, it is as high as 75 per cent. We are not afraid of reducing this shareholding if we want to share which means we want to allow others to participate. I found someone in him who was quite prepared to take similar steps to say sharing requires others to play and a neutral platform to emerge. That’s how the meeting of minds happened.
Q: There is always a fear that will it remain as a neutral entity. You have always been an independent player and now there are people who say that even if there is a personal investment, are you 100 per cent sure that it will be absolutely neutral. Is that a fear that should be completely dismissed?
Ans: I think so. I think that if they did not want to do a neutral platform first of all, they would not join us. They obviously had other choices like an IPO or a strategic divestment and or a tie-up with other operators. They obviously believed that it had to be a neutral party. They needed someone who was competent enough on the ground who had network optimisation, network building and network management and O& M capabilities which we have. From a financial standpoint, they could buy 8-10 companies if they had to. If they were not into this deal, there is no question of a sell down by them. The way this deal is structured, allows a very firm neutral and independent ground and allows no shareholding from telecom operators like RCom and allows a very open approach to sharing as we already have 10 other operators using our network. This is a very important step in that direction.
Q: And yet they remain very committed to this project?
Ans: I think they are hugely committed. Forget about how much is the exact shareholding of each party. When Mr Ambani owns 67 per cent in RCom, he was quite prepared to allow other players to also participate in this venture. In one of my interactions, I asked him and he was more than candid to say that he would like more and more telecom operators to be customers of this company and eventually 3-5 of them to come together, he would like them to be if and when needed--equity players. Also the fact that he is willing to allow strategic and other equity players to come along shows that this is a neutral platform.
Q: This also signifies a degree of maturity to allow this to happen because people say that Reliance is too big. This is also a paradigm shift for them.
Ans: I think they want to cut costs for the RCom network and they want to be the first among the big ones who want to say that--let a neutral player emerge and they want to support such a player and they would strategically remain aligned with such a business plan. They have shown it with their deeds that they can do it. I am very confident that this can be done.
Q: You said this will be a combination of cash and stock deal. How will it pan out?
It is important to understand that RInfra's assets at 50,000 towers and 80,000 tenants and right of first refusal (ROFRs) ; are valuable. Very clearly back of the envelope calculation will tell you that. The amount to acquire when you try to discharge the obligation through the merger, it will have either one of the two components--all stock or stock and cash. Very clearly it has to have both the components as to how much the component is--will depend on the valuation and due diligence. Due diligence will tell you how much debt and cash etc. It is a bit too premature to indicate numbers on that, at this moment.
Q: Some people would say that this is too big a deal for a company like GTL to manage and complete. There would be questions about how would you fund it.
When we went did the Aircel deal, everyone said it was too big and now it is done. Totally it is a deal of Rs 8,400 crore. There is no reason why this cant be done. You must be certain about one thing that Mr Anil Ambani is an extremely smart business person and he would not do a deal with us if we were not in a position to complete it. We have largely under-written our needs and requirements. We have several options using our own cash and contribution from founders, raising debt if need be, securitisation of future receivables. Potentially raising equity if need be. At present, we don't need equity. We believe we have adequate cash but all options can be used as and when required.
Q: And a strategic investor can also come on board? You don’t forsee any opposition?
The idea of a neutral and independent company is that you are prepared to share the network. RCom has become a tenant, not to increase their costs. They have become a tenant as it strongly believes that such a venture will reduce the amount of money that they pay, and also have operation and maintenance. That can happen only through sharing and there is no reason why they would not encourage it. And we at the management level, we have towers to be shared and increase the tenancy levels from current levels possibly upto three over a period of next few years. I think we have to look at other players through alliance, equity, strategic or whatever subject to the fact that it benefit other shareholders.
Q: Would these other partners be financial or strategic?
It would not be fair for me to comment on this at the moment. We will discuss with those who display interest and come back and report to the exchanges.
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Q: In terms of leverage. You have just closed Aircel and that was a big transaction. This is even bigger. Analyst community feels that there is an overhang and there is too much debt on the books.
Absolutely not. Post-Aircel if you look at the consolidated entity the debt equity is not more than 1.1. Analysts are not yet seen the balance sheet of the revenue because they do not know about it. One year down the line, after consolidation of RInfratel, Aircel and other ventures, you are looking at a revenue base of Rs 6,000 crore with potentially 70 odd per cent EBIDTA. This is without any new commitments that may come from ROFR or other customers. If you look at the revenue that is likely to grow. It has two-and-a-half to three per cent escalation every year. We have 15 year locked in contracts, no incremental capex on the network as you know in tower business operators pay all of that. We don't have pass through expenditure as that is always paid by the operator. It will have a revenue potential of anything between 150,000 to 200,000 crore over a 15 year period. If you NPV that at Rs 55,000-60,000 crore you have enough financial capability. This is not an issue. Globally if you look at it, tower companies have handled this very adequately and there is no reason why we can't.
Q: Given the global economic scenario, are you concerned about the scale of the deal?
In the recent G20 summit, everyone has admitted that India is a progressive nation, a power to reckon with. The Prime Minister of the country is taking many bold steps and globalising the economy. The recently concluded BWA and 3G auction only go to prove that as a country we have arrived with GDP of 8.5 per cent. We are only confident that government policies are in tune with such bold steps. As India goes global, Indian companies must grow with global scale and vision.
Q: Finally, what is the time lines that you are looking. From here to the final closure what are the steps that if you can explain.
Ans: Typically there are 3-4 major things to do. First we are in the process of appointing the valuers. We go through due diligence like checking out the number of towers, tenants, accounts etc. Followed by that, you come to ratios that you can announce. After the prices you need to take shareholder approval and you need to go through the High Court process of merger. The process can take anywhere between 4-6 months.