Idea Cellular Ltd. has completed the sale of its mobile tower business to ATC Telecom Infrastructure Pvt., paving the way for the merger with Vodafone India to form the country’s largest telecom operator.
The telecom firm sold its 9,900 towers across India to ATC for Rs 4,000 crore, it said in a filing with the stock exchanges. Its potential partner Vodafone had also sold its standalone tower business to ATC in April for Rs 3,850 crore.
Idea and Vodafone join rivals like Bharti Airtel Ltd. and Reliance Communications Ltd. that have been selling assets to pare debt in India’s competitive telecom market. The entry of Reliance Jio Infocomm Ltd. hurt the profitability of other operators as they cut tariffs to meet Mukesh Ambani's cheap data offerings, and triggered consolidation in the sector. By joining forces, Idea and Vodafone are preparing to take on Reliance Jio with an expanded base of over 41 crore customers.
After the completion of merger, about 6,300 co-located tenancies of the two operators will collapse into single tenancies over a period of two years without the payment of exit penalties, the statement said. Both Vodafone and Idea will continue to use the services of of ATC’s towers. The companies have agreed to treat each other as long-term preferred partners, the statement added.
With the closure of deal, ATC Telecom Infrastructure will have around 68,000 mobile towers in its portfolio.
The tower asset sales for both Idea and Vodafone were accounted for when they agreed to merge businesses last year and would not affect the terms of the merger. That also does not change the amount of debt that Vodafone will contribute to the combined entity.
With this, both Idea and Vodafone India have now monetised the standalone tower assets for a total enterprise value of Rs 7,850 crore, as per the timelines provided at the time of the announcement in November 2017, strengthening the financial position of the merged entity.Idea Cellular Media Statement
Idea, in its fourth quarter earnings, had said that the merger is in the final leg of regulatory approvals. A government official had told PTI in February that the approval to the merger will be given once the mobile tower sale is completed. Last week, a telecom department official also told PTI that the deal was cleared. Idea had said that they expect it to happen before July.
Shares of Idea Cellular closed 0.3 percent lower ahead of the announcement, in contrast to the benchmark Nifty 50 that closed 1.15 percent higher