Bharti may hive off telecom facilities
Bharti Airtel is looking at hiving off its telecom infrastructure into four companies to attract strategic and financial investors. Telecom infrastructure includes physical structures such as towers, cooling equipment and the electronics like base stations, etc.
Reliance Communication (RCL) was looking at a similar deal where it wanted to hive-off it to private equity investors in a deal valued at $ 1bn. Bharti has a much larger network and more infrastructure and the deal will be more than $ 4bn in capital assets only.
Bharti officials did not reply to an email questionnaire on the issue.In the case of Bharti, it won’t be a single deal but four deals with four different companies.
Moreover, as it is a GSM service provider, unlike Reliance a CDMA operator, there are more towers, especially in cities with high subscriber base. Bharti has the biggest telecom network in the country and the biggest subscriber base, hence the total deal will be the largest in telecom industry.
Bharti Airtel is already organised into four regions which are run as separate business units for operational efficiency.Telecom infrastructure in each of these four geographical region will be spun-off as a separate company and then strategic and financial investors will be invited to bid for them, according to sources.The company is unlocking value in its telecom infrastructure, so it turns its capital assets into revenues and cash. The new companies will share this infrastructure with other operators and charge them a fixed annual fee.
Bharti Airtel has more than 30,000 towers spread across the country. The number of towers for an operator is directly proportional to the growth in subscribers, and Bharti is continuously investing in more towers. Besides the capital cost of building a tower, there is an operational cost of maintenance.Bharti maintains a workforce of engineers and contract labourers to maintain these towers. The infrastructure and the workforce will be hived-off to a new company and then the investment will be invited.
Telecom infrastructure in developed markets like US are maintained by companies like American Tower. These companies offer this infrastructure to all service provider for an annual fee. This fee is generally lower than what each company would take to build and maintain its own tower infrastructure.
According to sources, Bharti is keen on making the business viable and will allow other operators to share this infrastructure. The strategic investors which are interested in bidding are GTL_s subsidiary GTL Infrastructure Ltd (GIL), Independent Mobile Infrastructure (IMI) and American Tower Corporation.
GIL is building some of the towers for Bharti in cities where the company is expanding. GIL has the management expertise to maintain the infrastructure and is raising funds from private equity to partners to bid for Bharti_s companies. IMI is a US based company formed by an ex-Goldman Sachs partner and is said to have the funding support from Goldman Sachs.
Each strategic partner is expected to bid along with a financial investor.Bharti is not keen on selling its complete stake in these companies, but is looking at diluting it in stages over the next few years.Possibly, the only issue holding back the company from announcing its intention to hive-off its infrastructure is government policy on telecom infrastructure.Currently only 74% FDI is allowed in operators.
It is not known how the government will deal with foreign funds or foreign companies investing 100% in telecom infrastructure.
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