No govt nod to Bharti Infra, Indus merger; deadline extended by 2 months

The merger of Bharti Infratel and Indus Towers yet again failed to receive the Centre’s nod. The deadline for the completion of the amalgamation has been extended by two months to February 24, 2020.

The Department of Telecommunications is required to take approval from the finance ministry for the deal, mainly on account of international arbitration of an old case when Vodafone bought Hutchison stake in the Indian telecom arm in an $11-billion deal.

The merger would have unlocked value to the tune of Rs 5,000 crore for Vodafone Idea, which is struggling to generate cash to pay dues.

The valuations have now gone down from what was estimated earlier and is only adding to the woes of Vodafone Idea. It currently holds 11.15 per cent in Indus Towers.

In September, Bharti Infratel had said it is expected that the dilution of equity stake held by the current shareholders of Bharti Infratel shall be lower on account of lesser number of shares to be issued against swap of Indus shares vis-à-vis the illustrative shareholdings disclosed in the original transaction announcement.

These would also result in lower cash payments to Vodafone Idea vis-à-vis the illustrative amounts disclosed earlier, it had said.

Since the completion of the merger is contingent upon receipt of requisite regulatory approvals and fulfilment of other conditions precedent, there can be no assurance that the merger can be completed within the extended time frame.

The merger proposes to create a company with over 163,000 towers having received clearance from the Chandigarh Bench of the National Company Law Tribunal in June, this year.

Bharti Airtel and Vodafone Plc — which currently own 42 per cent each in Indus Towers — were expected to hold 37.2 per cent and 29.4 per cent, respectively, in the merged entity.

Earlier the board of directors had extended the merger date till December 24, 2019, on the basis of agreements on closing adjustments and other conditions precedent for closing.

In April 2018, Bharti Airtel, Idea Cellular, and Vodafone Group had announced an agreement for the merger of Indus Towers and Bharti Infratel to create the largest mobile tower operator in the world outside China.

According to the original deal structure, Vodafone was to be issued 783.1 million new shares in the merged entity in exchange for its 42 per cent stake in Indus Towers, and this could take its holding to 29.4 per cent in the new company, depending on the options finally taken by Idea and Providence.

Similarly, Airtel’s stake in the new combined tower behemoth was to be diluted to 37.2 per cent in the combined entity, from 53.5 per cent it currently holds in Bharti Infratel. The transaction at the time of the deal announcement valued Indus Towers at an enterprise value of Rs 71,500 crore.