Idea gets nod to de-merge its passive infrastructure

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Mumbai: Aditya Birla Group company Idea Cellular on Thursday received approval from its shareholders and secured & unsecured creditors to ‘de-merge’ its passive infrastructure, namely its towers and base stations to its wholly-owned subsidiary Idea Cellular Towers Infrastructure Ltd.

Idea Cellular is not the first among other wireless telephony operators to separate their infrastructure operations; others such as Reliance and Bharti Airtel have done so previously. The de-merger of towers etc permits telephony operators to share infrastructure amongst themselves which in turn leads to reduction in capital costs. Such a de-merger also helps companies to monetize their assets.

“The de-merger route helps telecom companies bring transparency in terms of its ‘asset value’ and it becomes much easier selling this stake. There is a possibility the wholly owned subsidiary would in turn transfer the towers to Indus Towers,” an analyst with a broking firm said. Indus Towers is a three-way joint venture between Bharti Airtel, Vodafone Essar and Idea Cellular that manage towers in 16 telecom circles. Idea Cellular holds 16% stake in Indus Towers.

Recently, Vodafone Essar too received clearance from the foreign investment promotion board (FIPB), to hive off its towers and related infrastructure business into a separate arm called Ortus Infratel.

Vodafone had proposed that two Mauritius-based companies, Vodafone Tower Holdings and Essar Infratel would acquire 100% stake in Ortus and had sought the FIPB’s approval for the transaction. Reliance Communications and Bharti Airtel have already hived off their tower businesses.

For Idea (standalone) rent-paying cell sites jumped from 21,459 at December 2008-quarter end to 36,573 at March 2009-quarter end. This increase of 15,294 cell sites includes 11,094 cell sites on Idea towers, transferred to Indus, through the indefeasible right of use (IRU) effective January 1, 2009.

As of March 2009, of the 36,573 rent paying cell sites, 25,150 cell sites are on Indus Towers. Rental income that Idea was deriving from guest sites also ceased w.e.f. January 1, 2009 as these would accrue to Indus.

The combined impact of these two factors was the equivalent of 3.4 % EBITDA contraction for the quarter ended March 2009. Idea rolled out 4,941 cell sites during the March 2009 quarter, taking the FY09 tally to 19,437, and the EoP cell sites to 44,230.