Following the announcement of Indus Towers and Bharti Infratel merger to create the largest mobile tower operator in the world outside China, global credit rating firm Fitch sees two important synergies for the players. The combined entity post the deal is estimated to have an equity value of Rs 96,500 crore ($14.6 billion). The combined entity will have more than 163,000 towers across 22 circles India — the largest after China Tower. Interestingly, Bharti Airtel and Vodafone will jointly control the merged entity, which will have an enterprise value of Rs 71,500 crore, according to a joint statement released yesterday.
In an interview to ET Now, Nitin Soni, Director, Asian Corporates at Fitch Ratings Singapore said that the main synergies from the merger of these two companies will come from the saving of the dividend distribution tax and greater economies of scale. Further, these companies will benefit given the consolidation taking place in the industry. “When Infratel came out with the results, their collocation collections have actually declined as the smaller telcos exited from the market,” he told in an interview to ET Now. According to the expert, the deal will not impact Bharti Airtel in any way.
According to the details of the deal, Bharti Airtel and Vodafone will jointly control the combined company, and the transaction is expected to close before the end of 2018-19. In the complex web, the deal provides Aditya Birla Group’s Idea an option to sell its 11.5 per cent stake in Indus Towers for cash or in lieu of receiving new shares.
Further, Providence too has the option to receive cash or shares for 3.35 per cent of its 4.85 per cent shareholding in Indus Towers with balance exchanged for shares, according to the statement. Vodafone will be issued 783.1 million new shares in merged entity in exchange for its 42 per cent stake in Indus Towers, which could potentially make its holding at 29.4 per cent in the combined entity contingent on options finally taken by Idea and Providence.