After losing the race to acquire Aircel’s tower business, Tata-Quippo, one of the largest independent telecom tower firms, is back in deal action and is now pursuing a private equity deal.

SREI Group company, Quippo Telecom Infrastructure Ltd (QTIL), merged with Wireless Tata Telecom Infrastructure Ltd (WTTIL) to emerge as a formidable player in the tower space only to be rivaled by GTL Infrastructure Ltd when it recently scripted a $1.84-billion buyout of Aircel's de-merged tower operations.

QTIL, which currently holds a 49% stake and management control of the Tata Quippo combine, paid Rs 2,367 crore for the transaction of which only Rs 900 crore was funded through equity. Banking sources said, QTIL was interested in whittling down the accumulated $350-400 million debt at WTTIL level emanating from the merger effected in 2009.

QTIL had raised Rs 900 crore of equity for financing its cost of acquiring 49% stake in WTTIL from SREI Infrastructure, IDFC Private Equity and Oman Investment Fund. IDFC and GIC holds 11.24% stake each and OIF has 16.24% stake in QTIL at present.

This is also desirable as it may be hitting the market with a multi-billion dollar capital expansion plan to support its growth in the medium term. QTIL has a capex plan of $4 billion over the next two years to expand its tower base to 60,000, Umang Das, president at Quippo, recently told PTI. He said, private equity and IPO were some of the options being explored by the firm.

One source said, private equity giants like Carlyle, Apollo and General Atlantic may still be interested in a deal but at a "realistic price" as GTL's emergence as a rival independent tower player may put pressure on valuations. Further, there are divisive opinions on sobering tower valuations even though PE interest in this space continues unabated as witnessed in last week's deal at TowerVision.

Quadrangle Capital Partners led a consortium of investors for $300-million stake in TowerVision India, which operates about 5,000 towers.

In fact, some of the above-mentioned PE majors were in the picture to back Tata-Quippo's bid for Aircel arm, and might have infused over $1 billion in return for a sizable minority stake if it had clinched the deal.

The most recent deal between GTL-Aircel values each tower at Rs 48-49 lakh, signaling the trend of falling valuations of telecom towers since last year. Back in 2007 and early 2008, the Bharti Infratel Ltd and Reliance Infratel Ltd had valuations of between Rs 1.6 crore and Rs 2 crore per tower when they sold stake to private equity firms. The WTTIL and Quippo merger, which took place in early 2009, valued the towers at Rs 61-70 lakh. Though after this Nasdaq-listed American Tower Corporation (ATC) acquired Xcel Telecom at Rs 41 lakh per tower, but this was a smaller portfolio.

Last year, QTIL targeted a valuation topping $4 billion as it looked for a private placement to offload debt. While Tata-Quippo combine's valuation would have suffered, it may still fetch around $3.5 billion going by GTL-Aircel transaction benchmarks. GTL's acquisition of Aircel valued the latter's towers at Rs 49 lakh each.

Tata Quippo has 33,000 towers with a tenancy ratio of 2 per tower, which is higher than GTL's 1.2 per tower, Tata-Quippo may be valued at $3.44 billion going by the Aircel deal valuations much higher than $2.6 billion at the time of QTIL's merger with WTTIL.

Tata-Quippo would be increasing its tower network to 40,000 by end of the fiscal year. The company expects to expand to 60,000 in the next two years. Last week, QTIL unveiled $4 billion capex plans to fuel its aggressive expansion plans in one of the fastest expanding mobile telephony markets in the world.

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