Quippo Telecom Infrastructure Limited (QTIL) has completed the merger with Wireless-TT Info-Services Limited (WTTIL)—the tower arm of Tata Teleservices Limited (TTSL). The transaction involved QTIL picking up 49% stake in the merged entity WTTIL for a cash payment of Rs 2,367 crore (for 30% stake) and transfer of its 5,000 telecom towers in the merged entity (for another 19% stake).
The cash portion of the deal was partly funded through money raised from IDFC Private Equity and Oman Investment Fund, with the remaining amount coming from mezzanine capital and debt.
Although TTSL will have five board seats by virtue of 51% stake in the merged company, QTIL (which is sponsored by SREI Infrastructure Finance Limited) will get to nominate an independent chairman to the 10-member board besides having four board members in the 51:49 JV.
“There is no change in the deal structure. We will make upfront cash payment of Rs 2,367 crore and transfer all our towers to WTTIL. In exchange, we will get 49% stake and management control of the merged entity,” said Sunil Kanoria, Vice Chairman & Managing Director of Quippo Group in a press statement issued today. The company plans to have over 50,000 towers by 2012.
The boards of both companies — QTIL and WTTIL — met in Mumbai on Tuesday to complete the transaction. QTIL has already made a payment for a 30% stake in WTTIL, while for the remaining 19%, it would transfer 5,000 towers to the new company formed post the acquisition.
The two partners had announced the deal in January 2009 to create a Rs 13,000-crore entity with 18,000 towers, making it the second largest firm in terms of number of towers across India. The deal valued each tower at over Rs 72 lakh.
Overtime valuations have corrected in the space from over Rs 1 crore a tower to around Rs 50-75 lakh apiece. The sector has also seen a number of PE investments including a consortium of investors led by Temasek in Bharti Infratel.
The transaction also marks the continuation of consolidation in the telecom infrastructure space. Xcel Telecom was recently acquired by American Tower Corp, while Essar Telecom Infrastructure was reportedly in talks for a merger with Tata-Quippo tower company after a proposed deal with GTL Infrastructure in 2008 didn’t work out. Essar Telecom has around 4,500 towers.
Major players in the telecom tower space are the service operators– Indus Towers (a JV of Bharti, Vodafone and Idea with over 90,000 towers) besides Reliance Telecom Infrastructure and Bharti Infratel. Quippo was the one of the first companies in the country to commence sharing of passive telecom infrastructure in 2005.