New Delhi: The planned merger of Bharti Infratel Ltd and Indus Towers will not affect their relationship with Reliance Jio Infocomm Ltd as it continues to be an important customer, Bharti Infratel chairman Akhil Gupta said.

“Both Indus Towers and Bharti Infratel have Jio as a customer and the same will continue. After the merger, nothing changes in terms of customer and competition relationships," Gupta said in response to an analyst’s question at a conference call on Wednesday.

“Jio is and remains an esteemed customer...and if we were that uncompetitive, then we would be getting no orders from anyone," he added.

The two companies on 25 April agreed to merge their businesses to create the world’s largest tower company outside China.

The combined entity will own more than 163,000 towers, second only to China Tower. The merged company will be listed on the stock exchanges, as Bharti Infratel is a publicly traded company.

The merger will help Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd, which came together in 2007 to form Indus Towers, easily pare their stakes in the combined entity to raise funds to invest in their struggling telecom operations and cut debt.

“The merger will have no immediate difference other than increase in business...there will be savings of Rs200 crore per year on account of savings of the dividend distribution tax that Indus Towers pays to Bharti Infratel...there will also be some savings due to economies of scale and rationalisation of overlaps," Gupta said.

Bharti Infratel and Vodafone India own 42% each in Indus Towers, while Idea Cellular holds 11.15%. The remaining 4.85% is held by private equity firm Providence.

“Combined, the two tower firms will also have a much bigger play in the government’s smart city projects," he said.

Bharti Infratel and Indus Towers are in the final stages of commissioning of their smart city projects in Bhopal and Vadodara respectively.

On an analyst’s query on the impact of the cancellation of tenancies by Vodafone and Idea as a result of their proposed merger, Gupta said, “The merger (between Indus and Infratel) has nothing to do with the exit of (tenancies of) Vodafone and Idea."

The Vodafone-Idea merger is expected to attract exit penalty due to cancellation of their tenancies, but it is unclear whether it could be waived after the two tower companies merge.

Overall 25,000 tenancy exits are expected due to the Vodafone-Idea merger.

“We could look at options...which are win-win for all...Vodafone and Idea are our long-term partners," a Bharti Infratel spokesperson had said in a post-earnings call on 24 April, responding to an analyst’s question on whether the exit penalties would be waived if Indus and Infratel merged.

The merger of Indus and Infratel will need approvals from Competition Commission of India (CCI), Securities and Exchange Board of India (Sebi), National Company Law Tribunal (NCLT) and the telecom department. It is expected to close by 31 March 2019.

Once the merger is completed, Airtel, which currently owns 53.5% stake in Bharti Infratel, will hold between 33.8% and 37.2% in the merged entity, while Vodafone India will own between 26.7% and 29.4%.

Airtel and Vodafone India will have equal rights in the merged entity.

As part of the proposed merger, Idea has the option to either sell its 11.15% stake in Indus Towers for Rs6,500 crore or get a 7.1% stake in the combined company if Providence also opts to receive new shares in exchange for its shareholding in Indus Towers.

Providence has the option of choosing cash or shares for 3.35% of its 4.85% shareholding in Indus Towers, with the balance exchanged for shares.

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