Indus, KKR-backed Bharti Infratel merging to form World No 2 telecom tower firm
Photo Credit: Shah Junaid/VCCircle

Mobile infrastructure firms Indus Towers Ltd and Bharti Infratel Ltd are set to merge in a deal that will create the world’s second largest telecom tower company behind Beijing-owned China Tower.

Telecom majors Bharti Airtel Ltd, Idea Cellular Ltd and Vodafone Group Plc, along with private equity firm Providence Equity Partners, have agreed to merge their respective shareholdings in Indus Towers into telecom tower company Bharti Infratel.

The companies expect the transaction to be complete before the end of the current financial year.

The merger ratio of the deal will be 1,565 shares of Bharti Infratel for every one share of Indus Towers. Bharti Airtel and Vodafone will have equal rights in the merged entity, Indus Towers Ltd, which will continue to be listed on the Indian stock exchanges, the companies said in a joint statement.

Indus Towers’ enterprise value was pegged at Rs 71,500 crore ($10.8 billion) in the transaction. The merged entity’s equity value works out to be Rs 96,500 croe ($14.6 billion), it said.

With over 163,000 towers across all 22 telecom service areas in India, the combined entity will pip American Tower Corp (ATC) and AT&T Towers to be the second largest tower operator, globally.

Indus Towers is currently owned by Bharti Infratel (42%), Vodafone (42%), Idea Group (11.15%) and Providence (4.85%). At present, it has presence across 15 major telecom circles in India with 123,639 towers.

Idea Group has the option to either sell its 11.15% shareholding in Indus Towers for a cash consideration of Rs 6,500 crore (about $1 billion) or receive new shares in the combined entity based on the swap ratio. Private equity firm Providence will have the option to receive cash or shares for 3.35% of the 4.85% it holds in Indus Towers. The remaining stake can be exchanged for shares.

Vodafone will be issued 783.1 million new shares in the combined company in exchange for its 42% shareholding in Indus Towers. The transaction values Vodafone’s shareholding at Rs 28,400 crore, the statement said.

Vodafone’s and Bharti Airtel’s shareholding in the merged entity will depend on Providence’s and Idea Group’s decision to sell their shares in Indus Towers. The deal will also provide a future exit opportunity for Providence, which had picked up a 4.85% stake in Indus in 2016.

Bharti Airtel’s shareholding will be diluted to 37.2% in the combined entity from 53.5% that it holds in Bharti Infratel currently.

Bharti Infratel is backed by Kohlberg Kravis & Roberts (KKR) and Canada Pension Plan Investment Board (CPPIB). The board of the combined company will comprise 11 directors – three each from Bharti Airtel and Vodafone, one representing KKR or CPPIB, and four independent directors, including the chairman.

The transaction is subject to approvals from regulatory authorities, including the Competition Commission of India, Securities Exchange Board of India, the National Company Law Tribunal and Department of Telecom (for FDI approval), besides the shareholders of Bharti Infratel. Other relevant corporate approvals will also be taken from the companies involved in the transaction.

The combined revenue of Bharti Infratel and Indus Towers stands at $3.8 billion as on March 31, 2018. The merger will bring in benefits of scale for capex, both in terms of new tower roll-outs and maintenance, simplification of the organisational structure and cost efficiencies, the statement added.


India’s telecom sector has been going through a turbulent period ever since billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd began operations in late 2016, offering low-priced data plans and free call options.

In 2017, Vodafone India and Aditya Birla Group-owned Idea Cellular had agreed to merge in a $23.2 billion deal to create the country’s biggest telecom operator. Vodafone and Idea had also indicated that they will likely sell shares in Indus Towers.

While Idea and Vodafone India are merging, top carrier Bharti Airtel has acquired smaller rivals, including the Indian business of Norway’s Telenor ASA and the consumer telecom business of the Tata Group. Some others have either faced bankruptcy or have shut down their operations.

Tower deals

As part of the deal, Vodafone India and Idea Cellular decided to sell their tower businesses to telecom infrastructure firm ATC for Rs7850 crore. While Vodafone India has completed a part of the sale to ATC for Rs 3,850 crore this month, Idea’s sale of Rs 4,000 crore is expected to be completed soon.

Last year, Bharti Infratel had sold a 10.3% stake to KKR and CPPIB for Rs 6,193 crore to pare debt. KKR had invested in Bharti Infratel between 2008 and 2015. Previously, the PE arm of Goldman Sachs had also invested in Bharti Infratel.

In December 2016, Reliance Communications had agreed to sell a majority stake in its tower business to Canada’s Brookfield for $1.6 billion. NYSE-listed American Tower Corporation had bought a 51% stake in telecom tower firm Viom Networks Ltd for Rs 7,635 crore in 2015.

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