India's second and third largest telcos by subscribers, Vodafone India and Idea Cellular, have separately agreed to sell their respective standalone tower businesses in India to ATC Telecom Infrastructure Private (ATC TIPL) for an aggregate enterprise value of Rs 78.5 billion or $1.2 billion, an official statement said. The transaction is expected to take place during the first half of the calendar year 2018.
Idea will sell its entire stake in ICISL, and Vodafone India will sell a business undertaking to ATC TIPL. Upon completion of the sale of tower businesses, Vodafone India will receive $592 million and Idea will receive $615 million. The transaction will help both the companies to strengthen the balance sheet of the combined business.
"The receipt of these proceeds prior to completion was anticipated and provided for in the merger agreement and hence would not affect the agreed terms of the Vodafone India and Idea merger, including the amount of debt which Vodafone will contribute to the combined company at completion," the statement read.
Vodafone and Idea have a combined portfolio of around 20,000 towers with a combined tenancy ratio of 1.65x as at 30 June 2017.
"After Vodafone India and Idea have completed their merger, ~6,300 co-located tenancies of the two operators on the combined standalone tower businesses will collapse into single tenancies over a period of two years without the payment of exit penalties," according to an official statement read.
Both Vodafone India and Idea as customers and ATC TIPL as a mobile network infrastructure provider have agreed to treat each other as long-term preferred partners, subject to existing arrangements. "The parties will work together to further the expansion of high-speed mobile networks in India," an official statement read.
Both the telcos are currently in the process of merging operations. The merger, expected to be completed in 2018, is awaiting various approvals. In March 2017, Vodafone India and Idea Cellular announced the merger, which will create India’s leading operator worth more than $23 billion with a 35 percent market share. This merged entity will become a serious threat to Bharti Airtel, but with the recent merger with Tata Teleservices, Airtel is now up for the fight.
Under this merger, Vodafone India will get an implied enterprise value of Rs. 82,800 crores and Idea Rs. 72,200 crores. After the merger, Vodafone India will have 45.1% stake, whereas Idea Cellular will have 26 percent after paying Rs 3,874 crore cash for a 4.9 percent stake. And the remaining 28.9% will be held by other shareholders. The merger will be completed by March 2018.