India's top mobile operators have agreed to merge their tower subsidiaries Bharti Infratel and Indus Towers. This will create the world's largest tower company outside China, with over 163,000 towers operating across all 22 telecom service areas in India.
The merger ratio has been agreed at 1,565 shares of Bharti Infratel for every one Indus Towers share, based on an independent valuation of the companies. The new company, to be called Indus Towers, is valued at INR 715 billion (USD 10.8 billion), or a multiple of 9.3x EBITDA.
Vodafone India, which is in the process of merging with the other Indus Towers shareholder Idea Cellular, and Bharti Airtel will be the largest shareholders in the group, while Providence is expected to sell down its stake to 1.1 percent of the combined group. Under the proposed shareholders agreement, Bharti Airtel and Vodafone would each appoint three members of the board, one will be appointed by KKR/Canada Pension Plan Investment Board and four (including the chairman) will be independent. The management team will be confirmed prior to closing.
The companies said they are highly complementary, with Indus Towers operating in 15 telecom service areas (circles) and Bharti Infratel's operations focused on the remaining seven circles. Together they had INR 253 billion (USD 3.8 billion) in revenues for the fiscal year to March 2018, and the synergies from the merger are expected to support continued investment in 4G and roll-out of 5G networks.
Pending regulatory approval, the merger is expected to close by the end of the current fiscal year in March 2019. Bharti Infratel announced already last year that it was looking at merging with Indus Towers. It already holds a 42 percent stake in the company. The companies were reportedly also looking at bringing in new investors after completing the merger.
