Vodafone India and IdeaCellular Ltd said they agreed to sell their standalone tower businesses in India to the local unit of American Tower Corp for an aggregate enterprise value of Rs 7,850 cr (US $1.2 billion).
In case the sale is completed before the merger of Vodafone India and Idea, Vodafone India will receive Rs 3,850 cr (US$592 million) and Idea will receive Rs 4,000 cr (US$615 million).
The standalone tower businesses of Vodafone India and Idea are situated across the country and includes around 20,000 towers and had a combined tenancy ratio of 1.65 times as at 30 June 2017.
Idea will sell its entire stake in ICISL and Vodafone India will sell business undertaking to ATCT IPL to implement the deal.
The purchasing company is a majority owned subsidiary of American Tower Corporation.
American Tower Corporation is one of the largest global real estate trusts and one of the world’s largest independent telecom tower companies with a portfolio of around 149,000 communications sites.
The move increases the possibility that the two companies could explore the option of selling their stake in Indus Towers also to ATC. Bharti Airtel is keen to acquire the Indus portfolio. However, a sale to ATC will keep the Indus operations ‘neutral’ for Idea and Vodafone.
American Tower has agreed not to levy penalties when Idea and Vodafone merge their base stations into one as part of their corporate merger.
“Both Vodafone India and Idea as customers, and ATCTIPL as a mobile network infrastructure provider, have agreed to treat each other as long-term preferred partners, subject to existing arrangements,” the companies said.
“The parties will work together to further the expansion of high speed mobile networks in India,” it added.
After Vodafone India and idea have completed their merger, the merged company will remove about 6,300 base stations from these towers as part of the consolidation of the network. This will be done over two years without the payment of exit penalties, the companies added.
The latest transaction follows the Vodafone-Idea merger announcement of 20 March 2017 in which the two had promised to sell their individual standalone tower businesses 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 completions,” they added.
The deal is expected to close during the first half of calendar year 2018.
For the financial year ending 31 March 2017, Idea’s tower subsidiary ICISL reported revenues from operations of INR 759 cr and a networth of Rs 662 cr on a standalone basis.
After taking into account Consolidation effects, the contribution of ICISL to the Company’s consolidated revenues from operations and networth was INR 2,724 million (0.8%) and INR 1,758 million (0.7%) respectively.