India’s telecom giant Bharti Infratel Ltd. has finally decided to merge and create World’s second telecom tower company with Indus Towers, which will result in an estimated equity of $14.6 Billion overall.
As the smartphone usage in India is growing at quite a rapid rate, Indus Towers is seeking to capitalize its transactions, which worth around $10 billion, for creating a giant infrastructure with above 163,000 towers. Then it will lag only behind China Tower.
Bharti Airtel (BRTI.NS) is one of the top telecom carriers in India, also owning the majority shares in Bharti Infratel, is eyeing on becoming the biggest shareholder after the merge, followed by another giant Vodafone Group PLC (VOD.L)
Indus Towers has two other major shareholders – Providence Equity Partners and Idea Cellular (IDEA.NS), which will be given the options to cash out of the combined company.
Airtel has also stated that it will sort out potential investors separately for selling stakes after the companies merge into one.
In midst of an ongoing price war in the telecom sector, the deal has helped with spurring a rush of sudden M&A activity. This includes a planned merger of Idea and Vodafone India unit, which has the capability to threaten Airtel’s position in the Indian market as the biggest telecom carrier.
Currently, Bharti Infratel owns 42% shares of Indus Towers, but once the companies combine together it will pay 1,565 Airtel shares for each share of Indus Towers. This was stated by the companies under the deal.
After the merge happens, Bharti Airtel will be 33.8 to 37.2 % shareholder in the combined giant tower business. However, the name of this combined group will remain as Indus Towers.
As per the new deal, Vodafone (42% shareholder in Indus) will be offered new shares in exchange for its old stake. Hence, it has a probability to gain profit between 26.7 – 29.4 %.
The new deal between Indus Towers and Bharti Infratel is estimated to close before March-end in the upcoming year.