Vodafone Idea, Bharti Infratel spar over Indus Towers' stake sale

The clash is over Vodafone Idea's 11.5 per cent stake in Indus Towers

Differences seem to have cropped up in negotiations between cash-strapped Vodafone Idea and the Bharti group, regarding the sale of Vodafone Idea’s 11.15 per cent stake in Indus Towers. The all-cash deal could take place after the merger between Bharti Infratel and Indus Towers gets all clearances. 

Last week, the deal received clearance from the Department of Telecommunications.  

Sources close to Bharti said that though talks were on, no agreement had been signed. However, those close to Vodafone Idea said that an agreement had been signed in April 2018, and an National Company Law Tribunal (NCLT) clearance had also been obtained in May 2019. Therefore, they added, fresh clearance was not needed.  

Bharti’s view is that it would have to go to the NCLT once again, with a modified agreement for the merger, said people privy to the negotiations. They also pointed out that the tower business had seen erosion in value, with tenancy reducing to 1.8 from 2.3. This was on the back of consolidation in the industry between the date of the merger agreement being signed (in April 2018) and today.  

Spokespersons for both Bharti group and Vodafone Idea declined to comment. The Vodafone Idea stock shed 11.82 per cent to close at Rs 3.88 on Monday. In an exchange filing after Bharti Infratel’s board meeting on Monday, the firm decided to extend the long-stop date for the merger to April 24 from February 24, subject to each party having the right to terminate and withdraw the scheme.  

Bharti and Vodafone plc own 42 per cent each in Indus Towers, while Vodafone Idea owns 11.15 per cent and Providence owns 4.85 per cent. The deal will give Voda Idea the cash to pay its AGR dues of over Rs 57,000 crore. 

It has so far paid only Rs 3,500 crore and has been pushing for relief from the government. The deal will also help Bharti Infratel raise its stake in the merged entity from 33 per cent to 37 per cent. At present, Bharti has 53 per cent stake in Bharti Infratel, with the remainder held by public shareholders. The Bharti Infratel stock has seen a sharp fall from as high Rs 460 in 2017 to Rs 216 at present.   The original agreement states that the value of shares was to be based on an elaborate formula. First, the enterprise value of Infratel and Indus would be based on the last 12 months’ Ebitda, the average of 60 days’ price of Bharti Infratel as of the closing date, and net debt of the two entities on the date of closing. 

The resultant EV/Ebitda for Infratel shall be discounted by 10 per cent to arrive at the value of Indus. However, people in the know say there is a push to re-negotiate the terms.