Another telecom merger on cards – but a passive one

Written by Amit Agarwal on Oct 7, 2007

Mobile Tower MergerIn the run up to unlocking value in the tower business by telecom companies, there is now talk of a possibility of a merger of the tower business of three GSM mobile operators – Bharti Airtel, Vodafone and Idea Cellular which would create a mega tower company.

Telecom companies already have an agreement to share their tower infrastructure which consists of around 70,000 towers across India. Bharti has around 40,000 towers while Vodafone and Idea Cellular have 20,000 and 10,000 towers respectively.

The merger would help the companies to get a higher valuation rather than their individual business as it would lead to better operations, lower costs   and technical efficiency as towers could be positioned more strategically without overlapping of the areas.

For the equity component in the new company, one proposal being worked out is to give equity share according to number of towers each operator owns. This would mean Bharti would hold 57% stake while Vodafone and Idea would hold 28.5% and 14.5% stake respectively.

One possible reason for the idea of this merger could be the impending entry of new telecom operators in the country who have applied for new licences. Then, the infrastructure could be offered to new entrants bringing in more revenues.

Reliance Communications had earlier sold 5% of its tower business for $345 million and is forging an alliance with American Tower Corporation. via

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