As part of their ongoing merger process, Vodafone India and Idea Cellular today announced sale of their independent telecom tower businesses to ATC Telecom Infrastructure for Rs 7,850 crore in an all-cash deal.
Post-merger, which is expected next year, the combined entity will have over 35 per cent market share in the world's second largest telecom market with a valuation of over USD 23 billion. The merger was announced this March.
"This is an all-cash deal and the proceeds, which is Rs 4,000 crore for our 9,900 towers, will be parked in a separate account till the merger with Vodafone is complete," Idea managing director Himanshu Kapania told PTI in a concall.
Whether Idea, which is highly leveraged with over Rs 54,000 crore of debt as of the September quarter, will use the process to pare debt, Kapania answered in the negative, saying this sale is part of the merger agreement under which both the parties had agreed to divest non-core assets/towers before or along with the merger.
Earlier in the day, the Vodafone and Idea in a joint statement said they will sell their entire holding in Idea Cellular Infrastructure Services, which has 9,900 telecom masts, and Vodafone holding the rest will divest their tower business with 20,000 units, to American Tower.
With this deal, American Tower will become the second largest operator in the country with 70,000 towers, after Indus Towers--a joint venture between Vodafone, Idea (11.15 per cent) and Tata Tele--with over 1.25 lakh towers, he said.
"On completion of the sale of the tower businesses precedes the completion of the proposed merger of Vodafone India and Idea. Vodafone will receive Rs 3,850 crore and Idea will receive Rs 4,000 crore from the deal,"the statement said.
The standalone tower businesses of Vodafone and Idea comprise a combined portfolio of nearly 20,000 towers.
The deal is expected to be completed by the first half of 2018 and is subject to regulatory and other approvals.
While DSP Merrill Lynch was the sole advisor to Idea for the deal, Morgan Stanley was the deal-maker for Vodafone.
Explaining the rationale for the sale, Kapania said, "of the 20,000 towers, as many as 6,300 between Vodafone and Idea are co-located. So, divesting these would help us save anything between Rs 50,000 and Rs 55,000 per tower per tenant per month. And that is a huge savings to be made."
Over the weekend Vodafone India managing director Sunil Sood had told PTI that the merger was on track for completion in 2018 as they had got all the approvals expect those from the NCLT, which will begin hearing from the first week of December, and the Registrar of Companies and the DoT.
The merger was sort of a forced one as the incumbents Airtel, Vodafone and Idea, which are currently No 1,2&3, respectively were battered by the almost free offers from the new entrant Reliance Jio last September which led to a bruising price war among them. Post-merger, Bharti Airtel will become the No 2 player.
And the deep scars that this competition left in its wake is clear when earlier in the day Idea reported a massive Rs 1,107 crore net loss for the three months to September, as its business was hit by pricing pressure and GST introduction in a "challenging" operating environment.
"The operating environment remains challenging with unrelenting pressure on pricing, an 18 per cent GST and need for large investments to support the exploding data demand," Idea said.
Its revenue fell 19.72 per cent to Rs 7,465.5 crore from Rs 9,300.3 crore a year ago.
The company said while its data usage nearly doubled, the rate realisation "continued its free fall" and voice realisation rate too fell by 9.9 per cent over the June quarter, and mobile data realisation fell more sharply by 49.2 per cent, pulling down revenue per subscriber by 6.6 per cent to Rs 132.
Similarly, last month the market leader Airtel had reported a whopping 76.5 per cent plunge in net at Rs 343 crore for the quarter while RCom reported a net loss of Rs 2,709 crore.
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