Tatas agree to pay $320 mn as compensation to ATC by fourth quarter of FY19

The Tatas have agreed to pay $320 million (Rs 23.67 billion) by the fourth quarter of FY19 as one-time settlement to US-based tower company ATC as compensation for cancelling their long-term tenancy agreement with the company. 

They have also, along with IDFC, given notices to exercise their put option — under which they will together sell 15 per cent stake in ATC Telecom Infrastructure (ATCTIPL) to the US firm for Rs 29. 4 billion, subject to regulatory approvals. 

With this move, the Tatas’ equity holding in the company will reduce by half from 26 per cent to 13 per cent. IDFC will be selling off its entire 2 per cent stake. As a result ATC’s equity stake in the company will go up to 66 per cent.  

As a result of the compensation, ATC’s outflow to buy the 15 per cent stake is negligible, as they have to fork out only Rs 5.73 billion effectively. ATCTIPL is the second largest independent tower company in the country (after the proposed merger of Indus Towers with Bharti Infratel), with over 78,000 towers. 

In 2015, ATC had bought a 51 per cent stake in what was earlier known as Viom (now ATCTIPL) for $1.2 billion (at the prevailing dollar rate it was Rs 76. 35 billion). It bought the stakes from TTSL and the Kanorias, amongst others.   

The tenancy of Tata Teleservices was very crucial for the revenues of ATC, but the Tatas went through the cancellation after they decided to move out of the mobile business and sell it to Bharti Airtel, last year. Under the agreement with Airtel, TTSL had to clear all its liabilities as part of the agreement, and the deal is still pending regulatory clearances. 

According to estimates, ATCTIPL earned 30 per cent of its revenues in the second quarter of 2015 from TTSL. At the global level, TTSL accounted for $80 million, or 5 per cent of the consolidated property revenues, in the quarter ended June 2017 with around 30,000 tenancies.  People in the know said the remaining portion of the tenancy agreement, for which compensation had to be given, was at an average of six years.

ATC, however, is betting big on India and in its presentation pointed out that over 1.5 billion mobile phones are expected by 2022. 

It predicts that the country will require over 1 million cell site leases for 4G capacity, up from 600,000-700,000 after consolidation.