The Hindu Business Line : Bharti Infratel sells $1 b stake to global investors

New Delhi, Dec. 28 Bharti Infratel, the wholly owned telecom infrastructure subsidiary of Bharti Airtel Ltd, will sell off about 10 per cent stake to international investors for $1 billion.

The investors who have agreed to invest are Temasek Holdings, The Investment Corporation of Dubai, Goldman Sachs, Macquarie, AIF Capital, Citigroup and India Equity Partners (IEP), with Temasek Holdings being the largest investor.

This is one of the biggest deals in the telecom tower segment, pegging the enterprise valuation of Bharti Infratel to be in the range of $10-12.5 billion. The final valuation, within this range, will be determined on the basis of Bharti Infratel’s actual operating performance in FY 2008-09.

Bharti Infratel owns close to 20,000 sites in seven circles across the country. Plus, it has another 29,000 towers as it holds approximately 42 per cent stake in Indus Towers, the recently announced joint venture between Bharti, Vodafone and Idea, which has over 70,000 towers.

Market capitalisation

Bharti Airtel’s mobile operations in the same seven circles are estimated to be only about $5 billion. However, Infratel’s overall valuation is much lower than that of Airtel, which has a market capitalisation of over $44 billion.

The valuation implied by the stake sale in Bharti Infratel translates into an enterprise value per tower of about $2,02,430 (Rs 80.9 lakh). In comparison, Reliance Communications’ tower business was valued at Rs 28,000 crore, but since it has 14,000 towers, this translates into a higher enterprise value per tower of about $4,87,000 (Rs 2 crore).

Globally, however, tower companies are getting much higher valuations. The sale of Global Tower Partner by US private equity firm Blackstone at approximately $5,42,000 per tower is an example. Analysts point out that the US tower market is relatively mature, with average occupancy already reaching 2.5 times and wireless penetration at 77 per cent.

Growth potential

Indian tower companies on the other hand are seen to have huge growth potential, riding on low current population coverage coupled with high sharing potential as new operators roll out their services. Therefore, most of the mobile operators have hived off their infrastructure into a new company in a bid to unlock its value.

Standalone tower companies such as American Tower Company, GTL, and Quipo have also jumped into the fray in a bid to garner a share of the infrastructure segment.