Telecom service provider Tata Teleservices (TTSL) today merged its infrastructure business with independent infrastructure equipment rental company Quippo Telecom Infrastructure (QTIL) to form the country’s largest independently managed tower company with an enterprise valuation of Rs 13,000 crore.
Unlike Indus, which is a combined venture between rival telecom operators Bharti Airtel, Vodafone Essar and Idea Cellular, this entity will be run by independent professionals.
India’s largest company Indus owns about 80,000 towers. Reliance Communications has also hived off its infrastructure arm, Reliance Infratel, which has around 40,000 towers.
Under the agreement, QTIL — promoted by the Kanorias of Srei Infrastructure Finance — will make an upfront cash payment of about Rs 2,400 crore for 49 per cent share in the new entity through which it will gain management control. This amount will invested as capital expenditure for TTSL.
Subsequently, Quippo Telecom will demerge its own towers’ business (QTIL) and transfer their passive telecom tower portfolio of about 5,000 towers to TTSL’s tower arm Wireless-TT Info-Services Limited (WTTIL). The combined entity will, therefore, have a portfolio of over 18,000 towers.
On the other hand, TTSL will retain 51 per cent stake in the merged entity, while management rights in WTTIL will be handed over to an independent management led by Quippo Telecom. QTIL will, therefore, possess the ability to nominate key professionals such as the managing director and chief financial officer and representation on key committees. The board of directors will comprise representatives from both companies, led by an independent chairman.
The transaction is expected to completed by the first quarter of FY10, subject to judicial clearance.
“This new entity is valued at Rs 13,000 crore, which we expect to spurt up further. We view this as a big opportunity since the new entrants in telecom will need to share the passive infrastructure as it will be expensive for them to set up their own. Also, with 3G and broadband wireless access (BWA) auctions around the corner, it gives such companies a lot of opportunities to grow,” said TTSL Managing Director Anil Sardana.
“We are aiming to set up more than 50,000 towers within the next two years, and expect the highest tenancy rate in the world,” added Sardana. While the towers currently have a tenancy ratio of about 1.5 a tower, it is expected to go over 2 in the next couple of years.
The company is poised to invest over Rs 5,000 crore for the expansion of its business in three years.
Sunil Kanoria, director, QTIL, and vice-chairman and MD, Quippo Infrastructure Equipment, said, “Over and above the upfront payment of Rs 2,400 crore, we will invest Rs 2,000 crore in 2009 as we set up 8,000-10,000 towers and will scale this up to Rs 5,000 crore in the next two to three years.”
“Listing of the company is certainly something that we will look at in due course of time,” he added.
Last year, both companies made strategic acquisitions to expand their base. In early 2008, QTIL acquired about 1,000 towers of Spice Telecommunications across Punjab and Karnataka for nearly Rs 600 crore. In November 2008, TTSL had entered into an agreement with Japanese telecom major NTT DoCoMo, as part of which the Japanese company acquired a 26 per cent stake in TTSL for $2.7 billion.
As part of NTT DoCoMo deal, the Japanese firm and Tata Sons, the parent of Tata Tele, will make an open offer for up to 20 per cent of listed unit Tata Teleservices (Maharashtra). The offer was slated to open on January 8, 2009, but has been delayed as it still awaits approval from the Securities and Exchange Board of India.
Meanwhile, close on the heels of rival CDMA operator Reliance Communications’ recent launch of its GSM services, TTSL is also expected to launch GSM in the coming months. “We will announce our GSM services shortly. We have spectrum in 13 circles and hope to get spectrum in the rest of the circles soon,” said Sardana.
He further said, “We have already placed all our equipment orders with Nokia-Siemens, Huawei and ZTE and for transmission with NEC. By the end of CY09, we hope to launch our services in all the circles in the country. We have earmarked $2 billion for our GSM rollout, which is enough to accommodate about 60 million subscribers.”
