Bharti Infratel-Indus merger approved by DoT

DoT approval offers a much-needed opportunity for Vodafone Idea to raise funds to clear a portion of its massive AGR dues.

The Department of Telecommunications (DoT) has approved Bharti Infratel’s mega-merger deal with Indus, clearing the way for creating one of the world’s largest telecom tower companies with more than 1,63,000 towers. It is offering a much-needed opportunity for struggling Vodafone Idea to raise funds to clear a portion of its massive AGR dues to the government.

The companies are believed to have received the critical foreign direct investment (FDI) nod for the merger deal from DoT on 21st February 24, 2020. The deal was stuck for several months as DoT is learned to have held in abeyance the FDI approval due to USD 3.14 billion withholding tax dispute between UK’s Vodafone Group and India.

Bharti Infratel and Indus Towers have overlapping operations in four circles— Uttar Pradesh (West), Uttar Pradesh (East), Haryana, and Rajasthan. Their merger would create a Pan-India company operating across all 22 telecom service areas and have a tenancy ratio or the number of operators who put up their antennae on the towers of 1.86 times.

Indus Towers is a joint venture between Bharti Infratel, UK-based Vodafone Group Plc, and Vodafone Idea.  Bharti Infratel and Vodafone hold 42% stake each in Indus. Vodafone Idea holds 11.15% stake, and the remaining 4.85% is with private equity firm, Providence. Airtel has the highest stake in Bharti Infratel.

Loss-making Vodafone Idea has been banking on this tower merger deal closure to raise roughly USD 4,642 million from the sale of its stake in the combined entity, which could be used to pay a portion of its AGR dues, estimated at nearly USD 8.14 billion by the DoT.

Indus Towers is a three companies joint venture between Bharti Infratel, UK-based Vodafone Group Plc, and Vodafone Idea, with the first two holding 42% each. Vodafone Idea owns 11.15%, while the remaining 4.85% is with private equity firm, Providence. Airtel has the highest stake in Bharti Infratel.

Debts have ballooned for Vodafone Idea and Bharti Airtel, who were adversely affected by the entry of Mukesh Ambani’s Reliance Jio Infocomm Ltd., which initially offered free data followed by rock-bottom tariffs. That forced incumbents to either merge or exit the market

The Bharti Infratel and Indus Towers merger deal was signed on 23rd April ,2019 and was to be concluded by 24th October,2019. Subsequently, the companies extended the contract initially by two months to 24th December 2019, and another two months to 24th February, 2020 in the absence of DoT approval.