Mumbai: Brookfield Asset Management Inc. has submitted the highest bid for a 51% stake in telecom tower service provider Bharti Infratel Ltd and started exclusive talks with the company’s promoters Bharti Airtel, two people aware of the development said.
Brookfield, which manages $250 billion assets worldwide, beat a consortium of US-based private equity (PE) funds KKR & Co. and Blackstone Group LP, and Canada Pension Plan Investment Board (CPPIB) to submit the highest bid, according to the first of the two people cited above. Both of them declined to be identified.
However, according to the second person quoted above, there is a high chance Brookfield may settle for a significant minority stake if Bharti Airtel is unwilling to relinquish control. The two-week exclusivity period for talks will be over by 4 December, this person said.
Bharti Infratel had a market value of about $10 billion (Rs68,537 crore) as on 29 November and a 51% share will be valued at about $5 billion. However, the details of Brookfield’s bid are not yet known.
Brookfield and a consortium of Blackstone, KKR & Co. and CPPIB were in race to buy as much as 40% in Bharti Infratel, The Economic Times had reported on 17 November.
“We decline to comment beyond our initial statement of 25 October 2016 that was issued to the stock exchanges,” said a Bharti spokesperson. Spokespersons for KKR, Blackstone, Brookfield and CPPIB declined to comment.
On 25 October, the Bharti Airtel board had approved the sale of a significant stake in Infratel. Bharti Airtel owns 71.7% in Infratel, while the rest is held by public shareholders.
Bharti Infratel had a consolidated revenue of $1.8 billion in 2015-16.
According to consulting firm Deloitte, Bharti Infratel owns 42% in Indus Towers—India’s largest telecom tower company which is a joint venture of Bharti Infratel, Vodafone India Ltd and Aditya Birla Telecom (Idea Cellular).
Bharti Infratel owns 89,791 towers—38,832 of its own and 50,959 towers represented by the 42% stake in Indus Towers, Deloitte said in a June 2015 report.
Bharti Infratel has a standalone market share (in terms of installed tower base) of 9.8%, and 40.8% market share together with Indus Tower, as of 2014-15.
“The discussion with the consortium will begin, if the talks with Brookfield fails or does not progress after 4 December,” said the second person cited above.
Bharti promoters are keen to know how Brookfield will work on the deal since the asset manager recently bought a 51% stake in Reliance Infratel, he added.
Last month, Brookfield agreed to buy a 51% stake in Reliance Infratel, the mobile phone tower asset of Anil Ambani-owned Reliance Communications Ltd for Rs11,000 crore in cash.
The deal helped reduce RCom’s debt, the most indebted mobile phone service provider in India with a debt of about Rs42,000 crore.
Reliance Infratel holds a 11.6% market share in terms of installed tower base.
Selling a stake in its tower business will help Bharti Airtel create a war chest to take on Reliance Jio Infocomm Ltd and Vodafone, two powerful rivals that have invested billions of dollars to build and strengthen their operations.
Reliance Jio had announced investment plans of an additional Rs1 trillion in its business until 2020. Vodafone India Ltd has received an infusion of Rs47,700 crore from its parent this year.
Bharti Infratel had raised about $1 billion in 2007 from various PE investors, including Temasek Holdings Pte. Ltd, Goldman Sachs and Citigroup Inc. KKR & Co. had invested about $250 million in the firm in February 2008. In 2012, the company raised about Rs4,113 crore through its initial public offering.