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Read more about Bharti Infratel may buy Voda\'s 42% stake in Indus Tower, become tower giant on Business Standard. If the company acquires the balance 58% stake in Indus Tower, its tower network
Indus Tower, become tower giant
Bharti Infratel could become a majority owner in Indus Towers if talks with
Vodafone India for its 42 per cent stake in Indus are successful. The Bharti Infratel
board earlier took a resolution to explore and evaluate the acquisition of a stake
in one or more tranches in Indus Towers with an aim to make it a subsidiary.
Analysts believe it is not whether the deal will be sealed or not but when and at
Both Bharti Infratel and Vodafone India have 42 per cent stake each in Indus
Towers, while Idea has 11 per cent stake and Providence a 5 per cent stake. Bharti
Infratel’s decision to increase its stake coincides with the decisions of its parent
(Bharti Airtel) to shed its stake in the company. Idea and Vodafone too are keen
to shore up their balance sheet by selling their stakes in Indus Towers to expand
their operations and fight out the pricing war with Reliance Jio.
The acquisition will make Bharti Infratel, which is currently the second largest
tower company after Indus Towers, the largest in the country with a tower count
Bharti Infratel’s current tower count is about 91,000 towers. The second largest
operator would be American Tower after it completes the acquisition of
standalone towers of Idea and Vodafone, which would take its tower count to
While the acquisition moves are known, the street will await valuations at which
the deal goes through. Assuming that Indus Towers deal is done at similar
valuations to that of Bharti Infratel of nine times FY18 enterprise value to
operating profit, the deal value works out to just under Rs 700 billion (Rs 70,000
crore). Bharti Infratel’s current market capitalisation is Rs 640 billion (Rs 64,000
Analysts at Nomura believe that if the deal is done at these valuations, it will turn
earnings accretive in the second year of acquisition if 90 per cent of the deal is
funded by debt and the rest by cash. Bharti Infratel is expected to end FY18 with
cash and cash equivalent of Rs 67 billion.
While this gives Bharti Infratel the benefit of size, given the deals signed by Idea
and Vodafone with American Tower, which includes no exit penalties post
rationalisation of towers, a similar arrangement with Bharti Infratel will be a
negative for the stock. Moreover, any downward price negotiations by the
telecom operators of the terms of their master service agreement would also
impact its net profits and valuations.
Article By - Business Standard