In one of the largest transactions in the telecom space, Vodafone India and Idea Cellular have separately agreed to sell their standalone tower business to American Tower Corporation (ATC) for an enterprise value of Rs 7,850 crore. Himanshu Kapania, managing director, Idea Cellular, tells Shubhra Tandon what the deal means for the proposed Idea-Vodafone merger. Edited excerpts:
Could you highlight what this transaction means for the proposed Idea-Vodafone merger?
As part of the Idea-Vodafone merger, we had agreed to strengthen our balance sheet and sell non-core, non-strategic assets. We identified standalone towers and agreed to sell them to ATC in an all-cash transaction of Rs 7,850 crore. The amounts were pre-decided and the merged entity is the owner of this monetisation. If the transaction of the tower deal happens before the merger, Idea will receive Rs 4,000 crore and Vodafone India will receive Rs 3,850 crore. If the transaction happens after the merger, the combined entity will receive Rs 7,850 crore.
What are the benefits of the transaction?
There are overlapping tenancies of Idea on Vodafone towers, and vice-versa. These overlappings were 6,300 and will now collapse into a single tenancy post the merger, staggered over two years without any exit penalties. So, there are two benefits of this transaction — one, it is an all-cash transaction, and the second is the collapsing of overlapping tenancies without any exit penalties. For Idea, if we were to look at the EBITDA from these towers, it was Rs 194 crore, and adjusting for the collapsing of tenancies and no exit fees that we would have had to give, the valuation of this transaction comes close to Rs 13,500 crore, making it one of the biggest deals in telecom sector thus far.
With the standalone tower asset sale nearly done, what is the update on selling Idea’s stake in Indus Towers?
As we had guided at the time of the proposed merger, we will also sell our stake in Indus, which is 11.15%. We are continuously evaluating various options that we are receiving. Nothing has firmed up yet.
What will the proceeds from the deal with ATC be utilised for?
The primary objective of selling non-core assets, including standalone towers, was to strengthen our balance sheet and deleverage it. This amount contributes anywhere between 6% and 7% of the total likely leverage at the end of the proposed merger. Currently, Idea Cellular and subsequently, the merged entity, which is going to be India’s number one telecom service provider, will remain focused to expand its 4G coverage. Some of these proceeds, besides the internal generation of cash, will be used to step up the capex and expand Idea’s 4G presence.