TTSL sells 49% of tower arm for Rs 2,400 crore

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New Delhi: The country’s sixth-largest telecom company by subscriber base, the Tata group’s Tata Teleservices Ltd (TTSL), on Monday announced the sale of 49% of tower arm Wireless-TT Info-Services Ltd (WTTIL) to Quippo Telecom Infrastructure Ltd for Rs 2,400 crore in cash.

In addition, Quippo Telecom—which belongs to the to SREI group—will transfer 5,000 of its own towers to WTTIL and take management control of the company, even though TTSL still holds 51% stake. Subject to regulatory approval, Quippo Telecom will then be merged with WTTIL. The merged entity will have 18,000 towers, thereby becoming the largest independently managed tower firm in India with a valuation of $2.6 billion (around Rs 13,000 crore).

The company will invest Rs 5,000 crore over the next three years, of which Rs 2,000 crore will be in the current year itself. The number of towers will be increased to 50,000 in the next two years. According to Sunil Kanoria, vice-chairman & managing director, Quippo, half of the new entity’s revenues would come from TTSL alone.

TTSL managing director Anil Sardana said currently WTTIL had the highest tower-sharing ratio in the country, which would me maintained going forward. Sardana said the $2.6-billion valuation was “good and even better than peers”, and that the overall slowdown had had no effect. This is Quippo’s second deal in the tower segment following the December 2007 purchase of Spice Communications’ tower business for Rs 500 crore.

Telecom towers have been shared among operators since 2006, opening up a whole new revenue stream for mobile operators. Ever since then, major telecom players like Bharti Airtel, Vodafone-Essar, Idea Cellular and Reliance Communications have hived off their tower businesses and drawn attractive valuations.

For instance, Bharti Infratel, a wholly-owned subsidiary of the country’s largest telecom player, Bharti Airtel, two years ago sold 7-9% stake for $1.35 billion to a clutch of international investors including Temasek Holdings, Goldman Sachs, Macquarie, and AIF Capital. The company has a valuation of $10-12 billion. Bharti Infratel has over 25,000 towers.

Bharti Airtel also has a three-way joint venture--Indus Towers--with Vodafone-Essar and Idea Cellular, which has over 70,000 sites and commands a valuation of over $12 billion. Similarly, Reliance Communications Ltd has hived off its 46,000 towers to Reliance Telecom Infrastructure Ltd, which has a valuation of $6-8 billion. It has also sold 5% stake to a clutch of foreign investors for Rs 27,000 crore.