Delay in govt nod to postpone Bharti Infra-Indus Towers merger

Telecom infrastructure firm Bharti Infratel is going to miss the October 24 deadline to complete the merger of mobile tower giant Indus Towers with it due to a delay in government permission, according to a regulatory filing.

The company has set up a panel to assess the impact of the delay in the merger and recommend action to be taken in the best interest of the firm and its shareholders.

"The scheme (merger of Bharti Infratel and Indus Towers) contemplated the closing by October 24, 2019 (long stop date), by which time a large number of processes and conditions precedent were required to be completed...The board noted that all the requisite government approvals have not been received till date and conditions precedent and processes not completed. It therefore concluded that it is not possible to complete the scheme by the long stop date," the filing said.

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. It will have over 1,63,000 towers across 22 telecom service areas in India.

The company is waiting to get clearance from the Department of Telecom.

"The board authorised a committee of directors to explore and evaluate all possible options to secure the best interests of the company and its shareholders under the current facts and circumstances. Further, the committee is to forward its recommendations to the board on or before October 24, 2019," the filing said.

On the completion of the deal, the combined company will own 100 per cent of Indus Towers, which at present is jointly owned by Bharti Infratel (42 per cent holding), Vodafone (42 per cent), Idea Group (11.15 per cent) and Providence (4.85 per cent).

Post 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, subject to statutory approvals.

The deal gives Idea Group an option to sell its 11.5 per cent stake in Indus Towers for cash or in lieu of receiving new shares. 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.

As per the deal structure, Vodafone will 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 may be diluted to 37.2 per cent in the combined entity from 53.5 per cent it currently holds in Bharti Infratel. The transaction values Indus Towers at an enterprise value of Rs 71,500 crore.

Bharti Infratel, in a separate filing, said the company's chief financial officer, S Balasubramanian, had resigned to pursue a career outside the mobile tower firm. The company has also appointed Singtel Group Finance vice president Tan Yong Choo as an alternate director on its board.