Idea Cellular Ltd. and Vodafone India Ltd. agreed to sell their tower businesses to ATC Telecom Infrastructure Pvt. for a combined Rs 7,850 crore as India’s telecom operators continue to explore options to pare debt in a competitive market.
Idea Cellular will get Rs 4,000 crore and Vodafone India Rs 3,850 crore, said a joint press statement by the two companies that have already agreed to merge to create India’s largest wireless carrier. The Indian subsidiary of American Tower Corp. will gain approximately 20,000 towers. The deal is scheduled to be completed by the first half of 2018, subject to regulatory approvals.
The sale of tower assets is the first step in deleveraging Idea Cellular's balance sheet, Managing Director Himanshu Kapania told BloombergQuint in an interview. The tower unit was a non-strategic asset for the Aditya Birla Group company, he said. Idea Cellular's net debt stood at Rs 54,051 crore as of September 30.
The two companies join rivals like Bharti Airtel Ltd. and Reliance Communications Ltd. that have been looking to sell assets to repay loans. Telecom operators borrowed to acquire spectrum in multiple auctions since 2012 after the Supreme Court annulled permits in the airwaves allocation scam trial. A tariff war triggered by Mukesh Ambani’s Reliance Jio Infocomm Ltd.’s initial free services and cut-rate plans has only made it worse.
Idea Cellular’s net debt-to-earnings before interest, taxes, depreciation, and amortisation rose about threefold to 9 times since March last year. The tower sale will bring it down to 8.3 times, according to BloombergQuint’s calculations.
The tower sale is expected to generate about Rs 2,100 crore in property revenue and around Rs 800 crore in gross margin during the first full year in American Tower’s portfolio, the Boston-based company said in its exchange filing. It’s expected to be immediately accretive to adjusted funds flow from operations per share, ATC said.
The combined tenancy ratio for ATC will be lower than the average of Idea Cellular and Vodafone India’s after merger as their separate 6,300 tenancies will become common over two years, the Idea Cellular statement said.
Shares of the operator fell as much as 5.9 percent in early trade before recovering losses to trade higher. It was trading 2.8 percent lower at 11 a.m.