Bharti Airtel to sell stake in Indus Towers; deal to close before next March-end

Telecom major Bharti Airtel on Wednesday said it will hold talks with potential investors for a strategic sale in the merged telecom tower entity Indus Towers. The proposed move comes after Airtel earlier announced the merger of its tower arm Bharti Infratel with Indus Towers that will help create the world’s second-largest tower company with 163,000 towers across India.

The merged entity, which will be second only to China Tower, will change its name to Indus Towers and continue to be listed on the Indian stock exchanges. Bharti Airtel, the majority owner of Bharti Infratel, will hold between 33.8% and 37.2% stake in the merged entity and share equal rights with Vodafone.

The deal is expected to close before next March-end.

BNP Paribas said with the announcement of the merger of Bharti Infratel and Indus Towers, Idea will be able to deleverage its balance-sheet and it is a positive for all stakeholders.

“For Infratel, this means a pan-India presence. The lack of any lock-in on operator shareholding could lead to some overhang on the stock.

Though, cash requirements at the telco business will force telcos to trim their stake over time,” it said.

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Indus Towers operates in 15 telecom circles while Bharti Infratel is present in the remaining seven. The merger will create a pan-India telecom tower entity.

Shareholders of Indus Towers — Bharti Infratel, Vodafone, Idea and private equity firm Providence — will receive 1,565 shares of Bharti Infratel for every share held.

Vodafone, which currently has a 42% stake in Indus Towers, will get between 26.7% and 29.4% in the merged entity depending on the options two other shareholders in Indus - Idea and private equity firm Providence - exercise.

Idea has an option to sell its 11.2% stake in Indus for about $1 billion or receive new shares in the combined company. Providence has the option to encash or get shares aggregating 3.35% against its current 4.85% holding in Indus.

The new Indus Towers Board will have 11 members - three each from Bharti Airtel and Vodafone, one from KKR or Canada Pension Plan Investment Board and four independent members.

Source: DNA Money