In what could lead to Vodafone India Ltd’s divestment of stake in tripartite joint venture Indus Towers Ltd, a top official from the company said that some buyers have expressed “interest” in buying the company’s assets in Indus Towers Ltd.
“We have received interests from some infrastructure companies as well as private equity funds,” the Vodafone official said requesting anonymity. “Any decision to sell stake in Indus will depend upon buyers’ willingness to pay the right kind of return,” the executive said without disclosing the valuation of its stake in the company.
Indus is a three-way joint venture between Vodafone India, Bharti Airtel Ltd and Idea Cellular Ltd. Vodafone and Bharti Infratel own 42% each while Idea owns 11.15%. US private equity firm Providence owns the balance 4.85%.
The company also happens to be world’s largest telecom tower company with over 122,000 towers.
The mobile tower industry has emerged as an independent business to harness the potential for sharing of infrastructure. The business model arose from the need to achieve economies of scale and to reduce capital investment costs for providing mobile services. A tower infrastructure company essentially leases it to telecom service providers, enabling them to minimize duplication of investments and economize on costs of operation and maintenance, thereby improving profitability.
Bharti Infratel Ltd, a unit of India’s largest telecom services provider Bharti Airtel Ltd, is responsible for building the telecom towers. It is the largest of the operator-owned tower companies in India with a 42% economic interest in Indus Towers Ltd, India’s largest tower company. Airtel in March sold a 10.3% stake in Bharti Infratel to raise Rs6,200 crore and later in August, it sold an additional 3.65% stake to generate Rs2,570 crore. The money raised was used to pare debt and combat competition from Mukesh Ambani-promoted Reliance Jio Infocomm Ltd.
Vodafone and Idea have announced to merge their telecom businesses in India to create country’s largest telco.
The merger, which is expected to be completed in 2018, does not include the tower assets of Vodafone in Indus or the towers that the company owns on a standalone basis so that the company’s valuation could be brought down at par with that of Idea Cellular for the merger to go through, the executive said.
However, Idea’s tower assets are a part of the merger deal.
As per the shareholders’ pact, Airtel, Vodafone and Idea need to agree to any of their partners moves to sell down or exit the venture.
“Once the merger happens, quite naturally we (Idea and Vodafone) will have more stake in Indus than Airtel and that may not go down well with Mr Mittal (chairman of Airtel). So, clearly either we or Airtel will have to exit the company,” the executive added.
Vodafone and Airtel could not be reached for comments immediately.