Towervision investors dial tower cos

In talks with strategic players; initial valuation expectation at $600-700 million.

Less than a year after it led a clutch of financial investors to put in $300 million in debt and equity for a significant minority stake in Towervision, one of India’s largest independent telecom tower companies, Quadrangle Capital Partners — the $3 billion private equity fund co-founded by “car czar” Steven Rattner — is already in an exit mode.

The move comes at a time when, globally, Quadrangle is believed to be winding down its operations and its portfolio and fund will cease to exist in its current form.

According to two independent investment banking sources, the exit may actually result in a full buyout of the company, resulting in yet another consolidation opportunity in the telecom towers space.

Gurgaon-based Towervision claims to be the second largest independent tower company in India. According to its CEO, Amit Ganani, Towervision currently has 6,000 sites with 9,000 tenants across 14 circles. “Our target is to reach 10,000 towers shortly. But being an unlisted company I cannot share more details of my tenancy,” Ganani told Business Standard.

TowerVision’s promotes are a motley group of investors, including RP Capital from the United Kingdom, Israel’s Fore Group and Mivtach Shamir Real Estate (also from Israel), which has a 15.5 percent stake. Before Quadrangle, Towervision has had another round of fund raising of Rs 1,400 crore in 2008 where Morgan Stanley was the lead investor.

Sources said Barclays, which is acting as an advisor on behalf of Towervision, has already sounded out strategic players in the space like American Towers (ATC), Indus Towers — a venture controlled by Bharti Airtel and Vodafone Group Plc, Viom Networks (Tata Quippo) among others, but added that talks are still at a preliminary stage. Initial expectations on valuations, according to these sources, are said to be around $600-700 million, a figure many consider steep.

Ganani, however, refused to talk specifics about any potential deal in the company.

“Quadrangle has been a valuable partner for us. We are a growing company and hope to have a long association with them. And as a company policy, we do not comment on market speculation,” he said.

Quadrangle’s spokespersons Richard Barton and Jessie Hseih did not respond to Business Standard’s emails. But private equity (PE) watchers say Quadrangle’s moves are on expected lines.

Quadrangle, which at one point ran $5 billion of New York Mayor Micheal Bloomberg's personal fortune before the SEC opened probes into its role in an “influence peddling” scheme, involving the New York State Common Retirement Fund, has been in choppy waters since earlier this year.

Rattner, too, has exited from the fund, thereby, adding to its woes. There were even efforts to sell the fund to global PE giants Carlyle Group and Oaktree Capital Management, but the funds had baulked at the prospects.

Telecom analysts feel that despite the uncertainty in the sector, there is still room for consolidation involving players like Towervision.

“Compared to the last 2-3 years, valuations have come down. But there is a chance that they may go up slightly because 3G and broadband rollout is starting, and it could be a prospect. After six months, there would be more visibility on the 3G deployment as much of it would have already happened by then. Also, a lot of 3G deployment would be in the urban areas, so towers in those locations would command a premium,” said Research analyst Sanjay Chawla.

The tower space has recently seen consolidation, with smaller players having less than 6,000 towers looking at mergers or sellouts as they struggle to take on the might of larger rivals. Several of the smaller companies have been forced to cut back their national rollout plans for lack of funds.
 

TOWER POWER
Transaction	Deal size  (Rs  cr)	No. of towers  acquired
			Valuation  (Rs lakh per tower)	Time
GTL acquires Aircel's tower biz	8,400	17,500	48	Jan 2010
ATC buys Essar's tower biz	2,000	4,450	45	Feb 2010
Quippo acquires TTML's towers	1,318	2,535	52	Mar-2010
ATC buys Xcel Telecom	800	1,700	50	Mar-2009
ATC buys Transcend	95	325	29	Oct-2009

Industry players say firms like Aster Teleservices and TVS Interconnect Systems are also reportedly on the block, even though it could not be independently ascertained from the respective companies.

Last year, Xcel Telecom, incubated by Dallas-based $4-billion multi-strategy fund Q Investments, sold out to Nasdaq-listed American Towers (ATC) for Rs 700 crore.

This year, GTL Infrastructure acquired Aircel Cellular’s tower arm for an all-cash deal of Rs 8,400 crore. Its efforts to then merge with Reliance Communication’s tower subsidiary, however, got aborted.

This year, too, saw ATC acquiring Essar’s portfolio of 4,450 towers for Rs 2,000 crore. Similarly, Viom also bought out Tata Teleservices' Maharashtra tower business for Rs 1,318 crore.