American Tower to buy 51% stake in Viom Networks for Rs7,635 crore
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Mumbai: American Tower Corp. will acquire a 51% stake in Viom Networks Ltd for Rs.7,635 crore. It will acquire the stake from the current managing partner, Kanoria Group, and several other minority shareholders including Tata Teleservices Ltd and IDFC PE (private equity).
Viom, the second largest telecom tower company in India, currently owns and operates approximately 42,200 wireless communications towers and 200 indoor distributed antenna systems across India.
“Under the agreement, American Tower may acquire or be required to acquire all or a portion of the remaining 49% ownership stake in Viom,” American Tower said in a statement.
Additionally, the parties have agreed that once the deal is closed, American Tower’s existing Indian portfolio of approximately 14,000 towers will be merged with Viom, resulting in certain ownership adjustments, it said.
“With a population of nearly 1.3 billion people, rapidly growing smartphone penetration and limited fixed line infrastructure, India’s vibrant wireless industry is poised for a sustained period of network investment,” said James D. Taiclet, Jr., chairman, president and chief executive of American Tower.
“ATC India’s greatly expanded portfolio of towers will enable us to play a key role in providing the communications real estate essential to the deployment of advanced wireless technologies throughout the country and to support the Indian government’s Digital India Initiative,” Taiclet, Jr said.
“The 49% stake owned by other investors will come down to about 35% - with Tata to hold 26%, SBI-Macquarie to hold 7% and IDFC to hold 2%, after ATC merges its Indian business with Viom,” said Sunil Kanoria, vice chairman, Srei Infrastructure Finance, adding the merger will be completed in six months’ time.
American Tower anticipates consolidating the full financial results for Viom after the closing of the transaction.
For the quarter ended 30 June, Viom generated approximately Rs.5,000 crore in rental and management revenue and approximately Rs.2,100 crore in gross margin.
As on 30 September 2015, Viom had approximately Rs.5,800 crore in rupee-denominated debt outstanding.
As part of the deal, Srei Infrastructure Finance Ltd and other Kanoria Group shareholders, will exit their entire shareholding in Viom for Rs.2,952 crore. The group will also sign a non-compete agreement as part of the deal.
From Srei’s perspective, the divestment will have a multi-fold impact on the company, Kanoria said.
“The substantial cash flow will lower Srei’s debt and also reduce interest, thereby improving profitability. With this divestment, the debt: equity ratio and CRAR of Srei will dramatically improve,” said Kanoria.
Among other shareholders, Tata Teleservices will retain a part of its holding. Macquarie SBI Infrastructure Investments Pte Ltd, SBI Macquarie Infrastructure Trust and IDFC Private Equity Fund III will also retain certain interests, said the statement, without giving further details.
Vimal Bhandari, chief executive officer and managing director Indostar Capital Finance, said this is an important deal as it shows renewed interest from global firms to invest in the telecom sector which has, of late, gone through a phase.
Viom was formed through a joint venture between Tata Teleservices and Quippo Telecom Infrastructure Ltd (a part of the Srei Group) in 2009. Tata Teleservices owns 54% of the company while Quippo owns 18%. The remaining stake is held by private equity firms SBI Macquarie Infrastructure Fund, GIC Investments Pte Ltd (Singapore), IDFC Private Equity and Funderburk Mauritius Ltd (Oman Investment Fund).
There are close to 400,000 telecom towers in India at present and the number is estimated to increase at a compounded annual growth rate of 3% over the next four-five years.
The total number of towers is expected to grow to more than 511,000 by fiscal year 2020, of which 40,000 towers are expected to be only supporting data sites, a Deloitte report on the Indian tower industry in June said.
“The decline in growth of voice usage along with industry developments and regulations in India have raised concerns about the growth of independent tower businesses, thereby affecting their cash flows and debt repayments. However, exploding data traffic is leading to in-building solutions and smaller cell sites, and is expected to drive growth of the Indian tower industry in the future,” the report added.
American Tower is a leading independent owner, operator and developer of communication real estate with a portfolio of approximately 96,000 communication sites, according to the company’s website.
American Tower said it expects the transaction to be immediately accretive to AFFO (adjusted funds from operations) per share.
Evercore and Kotak Investment Banking acted as financial advisers to American Towers for the transaction. Credit Suisse served as exclusive financial adviser to Viom and its shareholders.