New Delhi: India’s sixth largest mobile phone services firm by subscribers, Tata Teleservices Ltd, and Quippo Telecom Infrastructure Ltd will merge their telecom towers businesses into a company that will be worth some $2.7 billion (about Rs13,000 crore).
Tata Teleservices has agreed to sell a 49% stake and management control in its Wireless-TT Info-Services Ltd, or WTTIL, for Rs2,400 crore to Quippo Telecom, controlled by Srei Infrastructure Finance Ltd.
Channelling funds: Tata Teleservices’ Anil Sardana says the merger will allow the company to concentrate on launching GSM phone services. Toshiyuki Aizawa / Bloomberg
Quippo Telecom and WTTIL will merge 5,000 and 13,000 towers each to form the new enterprise in which Tata Teleservices will have a 51% stake.
An independent chairman will be appointed by both companies.
The merged company will lease out its towers to phone firms that need to mount radios on them to expand their network coverage.
The entity will retain the Wireless-TT Info-Services Ltd name and have an enterprise valuation of Rs13,000 crore, a company statement said.
Enterprise valuation refers to the value of a company, including equity, debt and other interests, net of cash and cash equivalents.
“The transaction is targeted to close by June, depending on court and other approvals including FIPB,” Sunil Kanoria, vice-chairman and managing director of Quippo Infrastructure Equipment Ltd said.
FIPB, or Foreign Investment Promotion Board, is the government body tasked with approving deals that involve foreign investors.
Quippo Infrastructure currently owns 38.18% in Quippo Telecom. Its major investors include the Government of Singapore Investment Corp. with 12%, and others such as IDFC Private Equity, Oman Investment Fund and members of the Kanoria family.
The merged entity expects to have 22,000 towers by March and 50,000 towers up in two years, with an investment of Rs5,000-6,000 crore over three years, of which Rs2,000 crore will be spent in the next 12 months. The expansion will be funded through a combination of internal accruals, debt and fresh equity, Kanoria said.
“We are already in talks with the new operators like Swan and Unitech,” Kanoria said on the business prospects of the new firm, adding around 50% of revenues will be from Tata Teleservices leasing the tower firm’s assets. Swan Telecom Pvt. Ltd and Unitech Wireless Ltd are telecom aspirants that hold phone licences and spectrum rights to roll out services in large parts of India.
In December 2007, India’s leading phone firm Bharti Airtel Ltd, along with Idea Cellular Ltd and Vodafone Essar Ltd, formed a joint venture called Indus Towers Ltd with some 70,000 towers (30,000 were Bharti-owned) being shared by the operators in 16 states. The Bharti firm and Vodafone Essar own 42% each in Indus Towers, with 16% held by Idea Cellular.
Monday’s tower deal will help lower cost of operations for Tata Teleservices, an analyst said. “This deal gives the Tatas cheaper access to the infrastructure requirements of a telecom business as they would probably pay lesser as rent; it reduces their rollout cost,” said G.V. Giri, telecom analyst at online brokerage India Infoline Ltd.
Tata Teleservices currently serves its 32 million customers on the CDMA, or code division multiple access, technology platform. The firm plans to soon launch services on the GSM, or global system for mobile communications, technology platform. Three of four cellphone customers in India use GSM-based cellphones.
The merger will allow Tata Teleservices to concentrate on launching GSM phone services, for which it has earmarked $2 billion, its managing director Anil Sardana said, using part of the funds raised for its proposed GSM operations.
“One of the main benefits of the merger is that it allows us to focus on GSM and other capex expansion plans and allows the passive infrastructure business to grow independent of the telecom business,” Sardana said.
Tata Teleservices has spectrum rights in 13 circles at present and expects them in seven more circles.
The Tata company, which has placed orders on Nokia Siemens Networks, Huawei Technologies Co. Ltd, ZTE Corp. and NEC Corp. for telecom equipment, will face tough competition from the likes of Bharti Airtel and Vodafone Essar in GSM services.
On the soon-to-be launched services, Sardana said Tata Teleservices would operate both CDMA and GSM operations simultaneously. “It is up to the consumer to decide which one they want,” he said. “We will hopefully launch in all circles within the next 12 months.”
In November, NTT DoCoMo Inc. agreed to buy a 26% stake in Tata Teleservices for about $2.7 billion. It also agreed to make a joint open offer with Tata Sons for shares in a Tata Teleservices unit, Tata Teleservices (Maharashtra) Ltd. The offer, at Rs24.70 a share, was to open between 8 and 27 January. Regulatory approval for that offer, however, is pending, Sardana said.