Tatas May Merge Tower Arm With Qtil

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Tatas may merge tower arm with QTIL

30 May, 2008, 0158 hrs IST, TNN

MUMBAI: Tata Teleservices is learnt to be in talks with Srei group company Quippo Telecom Infrastructure (QTIL) to merge its tower arm, Wireless Tata Telecom Infrastructure. QTIL has emerged as the top bidder for a 49% stake in TTSL’s tower business. However, as QTIL is an independent tower firm, it can’t compete with WTTL, in which it will have a 49% stake.

“The two sides are evaluating the possibilities of a merger. Tatas will own equity in the merged entity,” sources told ET. “Bankers will be appointed in the next few days to work out the modalities,” sources added. Lehman Brothers and Citigroup, which were advising Tatas on stake sale in WTTL, are likely to be given the mandate for merger.

With close to 5,000 towers in its portfolio, QTIL is valued at Rs 3,000 crore. According to analysts, WTTL, which has over 10,000 towers under its belt, has an enterprise valuation of over $3.5 billion. The merged entity will command a valuation of around $ 4.5 billion, an analyst told ET.

A TTSL spokesperson said, “We are in discussion with several players for offloading a minority stake in our tower business and cannot comment any further on speculative queries.” QTIL CEO Probal Ghosal declined to comment. The telecom tower sector is seeing fast-paced consolidation.

Market leader Bharti Airtel, Vodafone Essar and Idea Cellular have floated a JV company Indus Towers. With 70,000 towers, it’s the largest tower firm in the world. GTL Infrastructure (GIL), a subsidiary of telecom network provider GTL, is also in talks to merge with Essar Group’s tower firm Essar Telecom Infrastructure.

“Consolidation gives benefits of scale. To offer compelling tower sharing composition to customers (operators), tower companies will need to have a large portfolio of shareable towers and vast reach,” said Angel Broking analyst (IT & telecom) Harit Shah.

QTIL, said to be the first independent tower company in India, is one of the most aggressive players in the space. Earlier this year, it lapped up all the 875 towers of Spice Telecommunications across Punjab and Karnataka for nearly Rs 600 crore. It has earmarked $3 billion for organic as well as inorganic growth during the current financial year.

For the past over one month, QTIL and Gurgaon-based independent Mobile Infrastructure (IMIL) had been negotiating the deal for 49% stake in WTTL. As reported by ET on April 19, these two were the only players left out of the 30 entities that had originally expressed interest in buying into WTTL.

After multiple rounds of presentations and discussions, the Tatas zeroed in on Quippo given the company’s experience in the sector, sources said. QTIL, owned 77.55% by Quippo Infrastructure Equipment, is targeting to have 25,000 towers by 2011. To achieve this, it has already tied up funds to the tune of $200 million.

IMIL was founded in 2006 by Jide J Zeitlin, a former partner at the Goldman Sachs Group. He is also the founder of the PE firm Keffi Group, which is the parent of IMIL.

TTSL’s listed subsidiary, Tata Teleservices (Maharashtra), has also received shareholders’ nod for hiving off its 3,500 towers into a separate subsidiary. Hiving off telecom towers into a separate company and monetising them has become a trend in the industry, with all the leading players doing so. Last week, Idea monetised 20% of its holding in Indus Towers.