Private equity arms of JPMorgan and Goldman Sachs and the telecom majors Nokia, Ericsson, Huawei and ZTE are in a race for picking up 22 per cent stake in Global Holding Corp (GHC), a leading player in telecom infrastructure and networking services space, reports PTI (Via ET).
GHC is the holding company for two listed firms GTL Ltd and GTL Infrastructure, and three unlisted entities. It holds a 30 per cent stake in the India Wireless Technology Ltd, which is in the business of manufacturing and fabrication of steel towers for telecom networks and the power transmission industry. GHC has two other wholly-owned arms, Global Projects and Global Innovsource and also holds 90 per cent stake in tower manufacturing arm Global Towers.
This is the second time GHC would be diluting its stake. In October last year, GHC diluted 8 per cent stake for $150 million to Technology Infrastructure, an offshore fund, and now intends to dilute another 22 per cent to raise around $700 million. It was argued that the investors picked up stake in GHC mainly because of the impressive performance of GTL and GTL Infrastructure.
The report however has no official confirmation from the company and the company’s communiqué to the stock exchanges is still awaited on this. The company had however indicated early this year that promoters intend to dilute anywhere between 9-30 per cent stake in GHC to raise $150 to $500 million for increasing promoters’ stake in the listed firms.
The market capitalisation of the two listed entities was $1.7 billion as on June 31, 2008. The Group recorded in excess of $600 million revenue last fiscal.
GHC holds 44 per cent in GTL Ltd and 23 per cent in GTL Infrastructure. GTL Ltd in turn owns 41 per cent in GTL Infra. GHC promoters have infused $101.76 million since March 2006 to enhance their stake in GTL Ltd through creeping acquisition from 26 per cent earlier. Promoters intend to hike GHCs stake in GTL Ltd to 69% and to 51% in GTL Infra directly.
GTL Ltd is looking for acquisitions in the network planning and professional services space. It had bought Malaysia-headquartered ADA Cellworks, UK-based Genesis Consultancy and US-based SCS for around $40 million. GTL Infra plans to invest $1.8 billion, through a mix of debt and equity, to increase the number of cell sites to 23,700 from around 6,360 now. It is reportedly interested in picking up majority stake in Essars tower arm.
Global Group is currently the third largest player in the network services and telecom infrastructure space in the world preceded by Altor Equity Partners-owned Relacom and Providence Equity and Warburg Pincus-owned Telcordia.
The potential for stand-alone tower business sector in India is visible from the fact revealed by the estimates of the Telecom Regulatory Authority of India that the country needs about 350,000 towers by 2010 from about 111,000 at present.
PE deals in the past
There have been many PE deals in the telecom infrastructure space in the past. Morgan Stanley picked up a stake in TowerVision India, a telecom infrastructure company which specialises in the provision of passive infrastructure to the wireless telecommunications industry on a shared, multi-tenancy basis. Reliance Communications sold a 5 per cent stake to a clutch of international institutional investors in the tower business for $337.5 million, which valued the the firm at $6.75 billion.
Bharti Infratel also raised $1 billion at an enterprise value of $10-12.5 billion from international investors such as Temasek Holdings, The Investment Corporation of Dubai (ICD), Goldman Sachs, Macquarie, AIF Capital, Citigroup and India Equity Partners (IEP). This is besides a JV Bharti Infratel, Vodafone and Idea Cellular had formed to hold some 70,000 passive cell sites.
In a smaller deal, Spice Communications sold its 875 towers to Quipo Telecom of Srei Group for Rs 500 crore ($126.5 million). Also, earlier this month, about five bidders, including American Tower, Essar and US giant Carlyle, have been shortlisted by Tata Teleservices for buying a large stake in its hived off tower business.