Exploring possibility of creating a mega tower company
Thomas K Thomas
New Delhi, Oct 5 This could be one of the biggest mergers in the telecom sector. After entering into an agreement to share their infrastructure, GSM mobile companies including Bharti Airtel, Vodafone and Idea Cellular are now exploring the possibility of merging their passive infrastructure to form a mega tower company.
Apart from leveraging on operational efficiency, the merger is aimed at getting a higher valuation for their country-wide mobile infrastructure. The three companies together own more than 70,000 towers across the country.
“The talks have been going on for some time, though no finality has been given to it. The companies are yet to agree on the modalities of being joint venture partners in terms of the equity share that they would hold and other operational issues,” said a source close to the negotiations.
One of the options being discussed is to give equity proportionate to the number of towers that the three companies own. According to industry estimates as of August, Bharti had 40,000 towers, Vodafone had 20,000 and Idea owned almost 10,000 towers. Going by this formula, Bharti could own 57 per cent in the merged entity while Vodafone and Idea cellular could get 28.5 per cent and 14.5 per cent stake respectively.
Confirming that initial discussions have begun, sources within the GSM industry said, “It is only a natural progression of the earlier decision to voluntarily share infrastructure. If the merger goes through, it would enable the operators to commercially tap the potential of their infrastructure.”
Bharti and Idea had earlier announced their decision to demerge their infrastructure into separate companies in a bid to unlock the value by offloading minor equity. “Merging their tower business would naturally push up the valuation higher. It will also bring down the cost of operation drastically for the operators,” said a market analyst. It could result in additional revenues for the three companies as the infrastructure can be offered to new entrants who have recently applied for licence. If the talks conclude successfully, then the merged entity could give tough competition to the likes of American Tower Corporation and Reliance Communications, that also have jumped into the tower business. More than 3 lakh towers are required by 2010, when the user base is expected to touch 500 million.Related Stories:
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