ATC buys Essar Telecom Infra for Rs 2,000 cr

To become third largest independent tower operator in India.

American Tower Company (ATC) today announced an agreement to acquire the entire issued share capital of Essar Telecom Infrastructure (ETIPL), through its Singaporean subsidiary, Transcend Infrastructure, for Rs 2,000 crore.

As ETIPL has 4,450 towers, the US company effectively paid about Rs 45 lakh per tower. This is marginally lower than what GTL Infrastructure forked out for acquiring Aircel’s tower business (Rs 48 lakh each).

It also makes ATC the third largest independent tower company in the country, with 6,950 towers, much behind leaders Tata-Quippo (33,000 towers) and GTL (32,500 towers). GTC had narrowly got past ATC last month to acquire Aircel’s tower business for Rs 8,400 crore.

Three Essar Group companies will be selling their stake in ETIPL to ATC, one of these being Essar Securities. The transaction is subject to some pre-completion requirements and is expected to be completed in approximately three months, says a press release. The Ruias, who own Essar, have been looking at getting out of the tower business for a while. However, the talks with ATC and some equity funds went on for a while, because the Ruias were not willing to compromise on the price.

The deal makes sense for ATC, which can now expand its presence in the east, a growth market for towers. Currently, ETIPL operates in 12 states. It has 20 per cent of its towers in Mumbai, another 10 per cent in Maharashtra, 50 per cent in the east and the rest in the south.

The price, say sources, is attractive because Essar has one of India’s highest tenancy ratios, at 1.8 (the number of clients who use a tower), compared to 1.1 of Aircel when it was up for sale. This will add to ATC India’s tenancy ratio, which stands at 1.5. “The addition of ETIPL to American Tower’s existing Indian operations will significantly strengthen our ability to serve our telecom customers. This will help them in enhancing their network coverage and in launching new technologies like 3G and WIMAX,” says Amit Sharma, Executive Vice President, Asia, of ATC.

“ETIPL has built a substantial portfolio of attractive and well located towers, a marquee client base and one of the highest tenancy ratios in the business. Going forward, the company under the aegis of ATC can look forward to significant growth and consolidating its position in this space,” says Vikash Saraf, Director, Strategy and M&A, Essar Group.

When Quipp bought WTTIL, the infrastructure subsidiary of Tata Teleservices, it paid Rs 30 lakh per tower. Late last year, ATC bought 325 towers from Transcend at Rs 29 lakh each. Last year, ATC bought 1,700 towers of Xcel Telecom for Rs 50 lakh apiece.

The consolidation spree in towers started in 2007, when Bharti Airtel, Vodafone Essar and Idea Cellular collectively decided to spin off their towers into an independent firm, Indus Towers, which currently has over 100,000 towers. Reliance Infratel comes next with over 50,000 towers. A Reliance Equities report, released in September, says the number of telecom towers in India in 2010-11 is estimated to grow to 337,375 from an estimated 282,074 in the current year.

Boston-based ATC, which has also presence in Mexico, Brazil, and Britain, entered the Indian market in September 2007. In May 2009, it acquired Mumbai-based Xcel Telcom, thereby adding 1,700 towers to its portfolio.

Analysts say consolidation in this business will continue, due to over-capacity of telecom infrastructure in the country. “The number of players will reduce when consolidation happens and competition will also reduce,” says Harit Shah, Analyst at Karvy Stock Broking.