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Here's why ATC may delay the acquisition of Idea and Vodafone tower

In November, an Indian subsidiary of ATC had agreed to buy 20,000 mobile towers owned by Vodafone India and Idea Cellular

Dev Chatterjee  |  Mumbai 

Telecom Tower
Telecom Tower

American Tower Corporation’s acquisition of Idea’s and Vodafone’s towers for $1.2 billion is set to get delayed. The reason: The firm has lost close to 65,000 tenancies due to the closure of multiple wireless service providers in the past few months. According to a source, the company is estimated to have lost close to Rs 20 billion of revenue and at least Rs 10 billlion of earnings before interest, tax, depreciation and amortisation (Ebitda). “The decline in the valuation of the company will be another $2 billion, as it paid close to Rs 2.5 million per tenant. This would delay the acquisition of the telecom towers of and Vodafone,” the source said. An email sent to ATC did not elicit any response till the time of going to press. In November, an Indian subsidiary of ATC had agreed to buy 20,000 mobile towers owned by India and Cellular. ATC Telecom Infrastructure, earlier known as Viom, had agreed to pay Rs 3.9 million per tower.

The deal would take ATC’s total tower capacity to 80,000. But since the transaction was signed, some customers of ATC shut shop. Tata Teleservices, Uninor, Reliance Communications and were the major ones to do so. This resulted in a straight loss of revenue as well as Ebitda, as all these had signed multi-year tenancy agreements with ATC. ATC is now consolidating its five Indian arms into a single entity and plans to merge the towers from abd with the new entity. A statement in November by and Idea had said if the deal went through before their merger, Vodafone India would get Rs 38.5 billion ($592 million) and Idea would receive Rs 40 billion ($615 million). Getting the money from ATC is important for both Idea and Vodafone. Idea’s losses increased since the proposed merger was announced last year and led to the Aditya Birla Group pumping in additional funds worth Rs 35 billion. Idea is also planning to monetise its 11.15 per cent stake in Indus Towers by selling the stake to Bharti Infratel. As per the agreement between ATC and Vodafone-India, post merger, 6,300 co-located tenancies of the two operators on the combined standalone tower businesses was to collapse into single tenancies over a period of two years without the payment of exit penalties. The sale of towers to ATC was according to Vodafone and Idea merger plan, whereby both had announced their intention to sell their individual standalone tower businesses to strengthen the balance sheet of the combined business.

Missed deadline

  • ATC loses key tenants
  • Tenancy loss due to closure of telecom companies
  • ATC-Idea-Vodafone transaction to miss deadline
  • Valuation of all tower to fall

First Published: Thu, March 08 2018. 06:10 IST