Vodafone Idea is pushing for equal stakes in a proposed.`40,000-crore optic fibre joint venture with Bharti AirtelNSE 1.05 % which wants holdings in proportion to assets owned as negotiations continue on the structure of what could become India’s largest such entity, people familiar with the matter said.
Broad agreements to form the JV are in place, with Vodafone Idea’s 156,000 route km of optic fibre and Airtel’s 246,000 route km together eclipsing Mukesh Ambani-owned Reliance Jio Infocomm’s 300,000 route km, which is set to be hived off as a separate unit. The intention is to bring in a strategic partner in the JV in about a year from deal closure.
“The talks are quite advanced. They will certainly want to monetise (the JV) in some time, but there is no immediate need due to their ongoing fund-raising initiatives,” one person told ET, adding that the deal should close in the quarter ending June 30, with the JV valued at Rs 35,000-40,000 crore.
While Airtel’s network is larger, Vodafone Idea’s deployment exceeds that of its rival in metros including New Delhi and Mumbai, which derive a higher valuation, another person said.
“Alternatively, it could be an equal partnership with equal assets pulled from both sides and the assets left out could be bought out by the JV on a fair valuation,” the person added.
The idea is to eventually make it an independent fibre network company that can lease out capacity to mobile phone companies, internet companies, cable firms and other entities catering to the surging demand for data-driven services, another person said.
“Both companies realise the benefit of sharing infrastructure while competing in the telecom space. The combined assets will have a better valuation and will be more attractive from the prospective investors’ point of view,” said a senior official at one of the two telcos.
Airtel is setting up Telesonic Networks Ltd to house its fibre assets, while Vodafone Idea is spinning them off into a wholly-owned unit with an intent to monetise it.
Airtel has been raising funds by selling stakes in its tower unit. Both Airtel and Vodafone Idea are also raising Rs 25,000 crore each through rights issues to invest in expanding their 4G networks to take on Jio while battling pressure on revenue, profitability and cash flows on account of competition.
Both companies didn’t respond to emailed requests for comment.
Airtel chairman Sunil Bharti Mittal had earlier confirmed that the first step to form a JV had been taken, saying, “We have made an invitation. We did that in towers — if you remember, Indus Towers was created. And on the same lines, we have asked Vodafone Idea to come and join the fibre company.”
IMPROVING LIQUIDITY
Jio received the company law tribunal’s approval last week to hive off its fibre and tower businesses into two separate units, which it hopes to monetise, either through a sale-and-leaseback or an investment trust structure.
According to ratings company ICRA, the market value of the fibre assets owned by Jio, Airtel, Vodafone Idea and state-owned Bharat Sanchar Nigam Ltd is about Rs 1,20,000 crore and the sale of even a small stake can generate sufficient funds to improve the liquidity position of the telcos.
India lags far behind other countries in terms of fibre deployment, with per-capita coverage at 0.09 fibre km vis-à-vis 0.87 for China and 1.3 for the US and Japan, said Harsh Jagnani, vice-president (corporate ratings) at ICRA.
Source: Economic Times