Bharti Airtel on Wednesday said it approved the merger of Bharti Infratel and Indus Towers to create nearly a $14.6 billion firm with 1.63 lakh towers across 22 circles in India. The merged entity is expected to be world’s second-largest mobile tower after China Tower.
“Indus Towers will be merged with and into Bharti Infratel through a scheme of arrangement,” Bharti said in a statement. “Bharti Airtel and Vodafone will jointly control the combined firm,” it added.
Before the merger, Indus Towers was jointly owned by Bharti Infratel (42 per cent), Vodafone (42 per cent), Idea Group (11.15 per cent) and Providence Equity Partners (4.85 per cent). Bharti Airtel and Vodafone will have equal rights in the combined company. After the union, the merged entity will be named as Indus Towers ltd, which will remain listed stock exchanges.
The transaction of the merger deal is subject to regulatory and other approvals, including from Competition Commission of India (CCI), Securities and Exchange Board of India (SEBI), National Company law Tribunal (NClT), Department of Telecom (FDI approval), and is expected to close before the end of the fiscal year.
The merger will help unlock value for the companies which are locked in a tariff war unleashed by newcomer Reliance Jio Infocomm ltd that has hurt earnings and triggered consolidation in the sector. Vodafone and Idea Cellular are already in the final stages to merge their mobile operations.
As far as the merger deal is concerned, Vodafone Group, Idea Celular and Providence Equity agreed to merge their respective shareholdings in Indus Towers into Bharti Infratel. Idea Group will sell its 11.15 per cent shareholding based on a valuation formula for Rs 6,500 crore. The group can opt to receive shares in lieu of cash equivalent to 7.1 per cent of the combined entity on the basis that Providence also elects to get new shares in exchange for its full 4.85 per cent shareholding in Indus Towers. No lock-in period is envisaged for the shares. Vodafone will be issued 783.1 million new shares equivalent to its 42 per cent shareholding in Indus Towers.
“Following completion, the Board of the combined company will comprise of 11 directors, of whom three will be appointed by each of Bharti Airtel and Vodafone, one will be appointed by KKR/Canada Pension Plan Investment Board and four (including the Chairman) will be independent. The management team will be confirmed prior to closing,” the statement clarified.
“The merger ratio of 1,565 shares of Bharti Infratel for every 1 Indus Towers share was within the range recommended by the independent valuer,” it said.
Bharti Airtel in a regulatory filing in the BSE said, “The Board after due deliberations approved the proposal for merger of Indus Towers ltd into Bharti Infratel. The Board decided to engage with the potential investors for evaluating a strategic stake sale post the completion of merger.”
“Taken together, Bharti Infratel and Indus Towers had over 1,63,000 towers and 3,67,000 tenancies as on March 31, 2018. With over Rs 253 billion ($3.8 billion) in revenues for the financial year ended March 31, 2018,” it added.
“The combined company will be well placed to invest on a national basis to satisfy the future demand from all telecoms operators in India as they continue to densify their networks to support sustained data traffic growth and roll out new network technologies,” the company statement said.
“Indus Towers currently operates in 15 telecom service areas (Circles) and Bharti Infratel’s operations are focused on the remaining seven Circles,” it added.
It further said, “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.”
On BSE, Bharti Airtel shares were trading at Rs 421.40 per share, up 3.77 per cent at 1.25pm, while Bharti Infratel shares were trading at Rs 327.30 per share, down 0.62 per cent at 1.27pm.