Indus Towers and Bharti Infratel agree to $14.6bn mega merger

25 April 2018 | James Pearce

Indus Towers and Bharti Infratel have agreed to a merger that will create the second largest tower company in the world based on number of towers.

The merger between the two pan-Indian tower companies will create a new unit with over 163,000 towers operating across all 22 Indian telecoms circles, making it the largest towerco outside of China.

The new unit will be named Indus Towers Limited and will continue to be listed on the Indian Stock Exchanges, both companies said in an announcement.

Indus Towers is a joint venture that was founded in 2007 and offers passive infrastructure services to Indian telcos. Vodafone owns a 42% stake in Indus Towers, but will get somewhere between  a 26.7% and a 29.4% stake in the new combined unit, depending on decisions to be made by its fellow shareholders in Indus.

Those shareholders are Idea Cellular – which is set to merge with Vodafone’s Indian unit – which holds an 11.2% stake in the towerco and private equity firm Providence, which holds a 4.85% stake. The rest of the shares in Indus (42%) is already held by Bharti Infratel.

Idea will be given the option of either selling its stake in the combined unit for approximately $1 billion or receive new shares in the combined business.

Once the deal is completed, Bharti Infratel’s majority owner Bharti Airtel will end up with a stake of between 33.7% and 37.2% in the combined unit. Airtel said it would look at potential options to sell some of this stake, which will be worth around $14.5 billion, once completed, according to Reuters.

The companies explained the strategy behind the merger, saying: “Indus Towers currently operates in 15 telecom service areas (“Circles”) and Bharti Infratel’s operations are focused on the remaining 7 Circles. 

“The combination of Bharti Infratel and Indus Towers, with their highly complementary footprints, will create a pan-India tower company with the ability to offer high quality passive infrastructure services to all operators on a non-discriminatory basis, needed to support the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies.”

The transaction is conditional on regulatory and other approvals, including from CCI, SEBI, NCLT, DoT (FDI approval), and is expected to close before the end of the financial year ending 31 March 2019.

Bharti Airtel and Vodafone will have equal rights in the combined company, but none of the companies will be subject to a lock-in on their shareholdings. The combined board will comprise of 11 directors – three each from Bharti Airtel and Vodafone, one from KKR/ Canada Pension Plan Investment Board and four who are independent.

Vodafone’s merger with Idea, which was announced in March 2017, will see the creation of a mobile operator with 400 million customers and over 40% market share, and comes as part of significant consolidation in the sector in India. 

Vodafone and Idea – which is controlled by the Aditya Birla group, a conglomerate with interests from cement to financial services – will eventually own identical stakes in the combined company, after some adjustments over the first four years after completion.

As part of the merger, Vodafone agreed to offload its Indian tower unit, which was sold to ATC Telecom Infrastructure Private Limited in a deal worth INR 38.5 billion (€478 million) earlier this month.

ATC, which is a majority-owned subsidiary of American Tower, will also snap up Idea’s 8,886-strong tower business in a separate deal expected to be completed in the first half of this calendar year.

The Vodafone deal sees ATC add 10,200 towers in India, significantly boosting its footprint in the country. It already owned more than 58,000 towers following the acquisition of Viom Networks in October 2015, acting as a direct competitor to the new Indus Tower company.