Mumbai: Kolkata-based Srei Infrastructure Finance Ltd will sell a 9% stake in telecom tower firm Quippo Wireless TT Info Services Ltd to private equity funds within three months, said vice-chairman Sunil Kanoria. Srei holds 25% in Quippo Wireless, which will be reduced to 16%.

Graphic: Yogesh Kumar / Mint

The sale is expected to raise Rs1,400 crore, which will be used to pay off debt that Quippo Telecom had taken to acquire and merge with Tata Teleservices’ tower arm Wireless TT Info Services Ltd in 2009.

“The debt will be replaced by equity," Kanoria said.

He added that he is also open to encashing Srei’s investment in the tower company when it hits the equity markets with an initial public offer in 2011, but added that such a sale was a “little far ahead".

Srei manages 38,000 mobile telephone towers under Quippo, with three other investors: Oman Investment Fund, Government of Singapore Investment Corporation Pte Ltd and IDFC Private Equity. The four firms together hold a 46% stake, while Tata Teleservices’ WTTIL is the majority shareholder with 54%.

The other investors, barring Tata Teleservices WTTIL, will sell 1%, taking the new investor’s holding to 10%.

The Srei sale will be the latest in a series of recent deals in the mobile tower business. Earlier this month Quippo bought 2,535 towers from Tata Teleservices (Maharashtra) Ltd for Rs1,318 crore, while Transcend Infrastructure Ltd, a subsidiary of American Tower Corporation, paid Rs2,000 crore for 4,450 towers to Essar Telecom Infrastructure Pvt. Ltd.

Indus Towers Ltd, a joint venture between Bharti Airtel Ltd, Vodafone Essar Ltd and Idea Cellular Ltd, is the largest tower firm in the country with at least 100,000 towers, followed by Reliance Infratel Ltd with around 50,000, and Bharti Infratel Ltd with at least 30,000 towers.

Analysts expect the tower business to pick up as new telecom companies expand their operations and established players get into so-called third generation (3G) technology that allows for faster data and video access. The government is expected to open bids for the often-delayed 3G mobile radio spectrum auction in April.

Rahul Jain, an equity analyst at Angel Broking Ltd, said 3G will help companies add revenue while newer firms will increase per tower usage, making the business profitable.

Quippo plans to invest Rs2,000 to Rs2,500 crore in building 10,000 to 12,000 new towers in the next year, which will increase the company’s debt to about Rs8,000 crore from the current Rs6,000 crore.

The firm rents towers to wireless service providers for 15-20 years and earns around Rs33,000 per firm per month. On an average, two telecom companies use their towers.

Another analyst with a private brokerage said it would be wise for a company to lease each tower to more than one mobile services provider to ensure revenue, as a mobile firm could exit towers that don’t see much traffic to save costs. “The more occupancy per tower, the more the revenue, and Quippo is well placed because they have Tatas with them," he said on condition of anonymity because he is not authorized to speak with the media.