Bharti Infratel announces merger with Indus Towers to create major tower firm

According to the latest reports, Bharti Airtel's tower subsidiary Bharti Infratel and Indus Towers have decided to merge their companies to create one entity. With a combined revenue of around Rs.25,360 crore, and 1.63 lakh towers across 22 telecom service areas of the country, this new pan-India tower company, which will be named Indus Towers Ltd, will easily become the world's largest tower company.

However, as per the reports, Bharti Airtel is planning a stake sale in the new tower company that will be formed after the merger. The company in a regulatory statement said, "The board has decided to engage with the potential investors for evaluating a strategic stake sale post the completion of the merger."

The merger between Bharti Infratel and Indus Towers is happening at a time when Bharti Airtel's tower arm registered 8-per cent annual growth in revenues to Rs.14,490 crore, while its net profit slipped by 9 per cent to Rs.2,494 crore.

The combined company, which will fully own the respective businesses of Bharti Infratel and Indus Towers, will continue to be listed on the Indian Stock Exchanges, the announcement said.

As per the regulatory filing, these companies said the combination of the two companies' footprints will create a tower operator with the ability to offer the high-quality shared passive infrastructure services. These services would be required to support the pan-India expansion of wireless broadband services using 4G/4G+/5G technologies, they said.

Bharti Airtel, in its board meeting on April 24, had received the recommendation from its committee of directors, following which it reviewed the options with regard to its stake in its subsidiary Bharti Infratel. The board evaluated two options – one an offer for the sale of a significant stake in Bharti Infratel from a consortium of leading PE investors and the other a proposal for merger of Indus Towers into Bharti Infratel. Hence, the board has approved the proposal for the merger of Indus Towers into Bharti Infratel.

Indus Towers is jointly owned by Bharti Infratel (42 per cent), Vodafone (42 per cent), Idea Group (11.15 per cent) and Providence (4.85 per cent). After the merger deal, Bharti Airtel and Vodafone will jointly control the combined company, in accordance with the terms of a new shareholders' agreement.

According to the proposal, Vodafone will be issued with 783.1 million new shares in the combined company, in exchange for its 42 per cent shareholding in Indus Towers. Besides, Providence, which has 4.85 per cent shareholding in Indus Towers, has decided to sell 3.35 per cent of its stake, while Idea Group will also sell its full 11.15 per cent stake in Indus Towers for cash.

After this deal, Vodafone's share in the new company could be around 29.4 per cent, while Airtel's stake in newly combined tower behemoth may be diluted to 37.2 per cent from 53.5 per cent it holds in Bharti Infratel.

Bharti Airtel on Tuesday posted a 78-per cent drop in its net profit to Rs.83 crore for the quarter ended March. Blaming the “artificially suppressed pricing” for tepid Q4 numbers, Gopal Vittal, MD and CEO, Airtel India & South Asia, said, "The telecom industry continues to witness below cost, artificially suppressed pricing. Industry revenues were further adversely impacted this quarter due to the reduction in international termination rates."

Airtel's revenues and net profits have some component of Bharti Infratel's revenues and net profits. Since Airtel and its wholly-owned subsidiaries own around 53.5 per cent stake in Bharti Infratel, Airtel revenue and net profit numbers would have been worse if the company didn't own a stake in Bharti Infratel. Besides, Bharti Infratel was instrumental in helping the parent company to pare a huge debt in 2017 when it sold 83 million shares of Bharti Infratel for Rs.3,325 crore.