Bharti Airtel, formerly India’s No.1 telecom operator, said it has acquired a 4.7% stake in India’s largest tower company Indus Towers from Britain’s Vodafone Plc.
The company is likely to have paid around Rs 2,650 cr for the stake, going by the current valuation of the tower company.
It said the money it pays to Vodafone Pls will be invested back into Vodafone Idea Limited and immediately paid by Vodafone Idea to Indus Towers to clear outstanding dues related to tower rentals.
“The said acquisition purchase would be at an attractive price representing a significant discount typically available for such large block transactions. In addition, Airtel is also protected with a capped price which is lower than the price for the block of Indus shares sold by Vodafone on February 24, 2022. This shall be value accretive to Airtel and protect its existing significant shareholding in Indus Towers,” Bharti Airtel said, without revealing the financial details.
Market observers have generally not been very impressed with reports that the company may acquire the stake, and have pointed out that tower companies do not fetch good valuations.
However, Bharti Airtel said it sees good prospects for Indus Towers.
“The telecom market structure has started to stabilise on account of the efforts of the Government of India including the recent relief package. We support the Government’s desire to have three private operators to serve the Indian Telecom market which is also in the best interest of Indus Towers.
“With the likely introduction of 5G in the future, we believe a lot more infrastructure would be required in which Indus Towers, an undisputed leader, has a significant role to play and partake the potential growth in the business.
“The stability and sustenance of a specialised and strong infrastructure company like Indus Towers is vital for a continued strong provision of co-location services including the support to rollout 5G. Such stability warrants a strong and stable shareholding structure to ensure financial stability and flexibility to respond to evolving needs of telecom operators,” the company said.
“We believe this transaction allows Airtel to secure continued strong provision of services from Indus Towers, protects and enhances Airtel’s value in Indus Towers, enables it to receive rich dividends and as also paves the way for subsequent financial consolidation of Indus Towers in Airtel.
“We believe that this self-paying capital allocation serves multiple strategic purposes for Airtel.
“Airtel remains committed to look at opportunities for monetizing this vital asset at an appropriate time. In doing so it will ensure that the tower company has been stabilized and any new strategic or financial investor/s has the ability to continue to serve the critical needs of Airtel,” it added.
The deal comes close on the heels of Vodafone Pls selling another 2.4% in the tower company for around Rs 1,424 cr.