"Second quarter earnings were bad and the tower deal valuation is not great", said Naveen Kulkarni, co-head of research at Phillipcapital India Pvt Ltd.in Mumbai on phone.
Idea Cellular and Vodafone India agreed to sell their mobile phone tower units to American Tower Corp., as carriers seek to sell assets to pare their mounting debt amid a price war that eroded their profitability. "The parties will work together to further the expansion of high speed mobile networks in India", the statement mentioned. Ltd for about $1.2 billion.
American Tower, which agreed to take control of Indian masts operator Viom in 2015 for 76 billion rupees, has been steadily expanding its presence in India - the world's second biggest wireless market with 1.2 billion mobile subscribers. Idea would get 40 billion rupees from the deal, while Vodafone will get the remainder, the company said. Reliance Communications, struggling under a $7 billion in debt, has also revived efforts to sell a stake in its tower unit Reliance Infratel, after a prospective deal with Brookfield Asset Management fell apart last month. It will have revenue of Rs81,600 crore and an operating profit of Rs24,400 crore.
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The standalone tower business of both companies comprises a combined portfolio of about 20,000 towers with a tenancy ratio of 1.65 as on June 30, 2017.
Morgan Stanley was the financial adviser to Vodafone while DSP Merrill Lynch was the financial adviser to Idea Cellular. The merger is expected to be completed in 2018. Mint had reported that Idea was also in talks to sell its entire stake in Indus to another buyer with the consent of Bharti Airtel. Stock of Idea was trading 5.62 per cent down at Rs 91.60 on the BSE in early trade. Accordingly, private equity funds KKR and Canadian Pension Plan Investment Board (CPPIB) had emerged as the top contenders.