Tata TeleservicesBSE 0.14 % (TTSL) is looking to offset telecom infrastructure commitments by offering its 26 percent stake in a local joint venture to controlling shareholder American Tower Corp. (ATC) for discontinuing rentals, said two people familiar with the development. This follows the Tata Group’s exit from mobile services. The value of the stake is pegged at Rs 5,000 crore while the penalty for early termination may be as much as Rs 7,000 crore. It’s unclear if Tata will offer additional cash payouts to bridge the deficit, the sources added.
TTSL has told ATC it will discontinue around 30,000 tower tenancies with ATC India and its unit Viom Networks. The 25,000 tenancies on the Viom network are locked in for six years, while 5,000 on the ATC India network are for three years, the sources said.
ATC issued a statement in October saying TTSL accounted for $80 million, or 5 percent, of its consolidated property revenue, including $32 million of pass-through revenue in the June quarter. TTSL accounted for approximately $40 million in gross margin for the quarter.
Since the consumer mobile phone network was sold to Bharti Airtel without any liabilities arising from previous agreements, these will have to be met by the Tata group, said the second person.
ATC may not have a choice but to agree to some sort of settlement since the Tata group is out of the wireless business, experts said. “The biggest risk an operator runs is that a disgruntled tower partner can switch the network off, but since the network is already sold, Tata group has little to lose,” said one of the persons. Besides, Tata has no use for these rentals even if it wanted to continue with them, he added.
The tower cancellations account for about half of what the TTSL network used, but overlap with existing sites that Bharti has on the Bharti Infratel and Indus Tower networks, said an executive.
ATC completed its purchase of 51 percent in Viom Networks from the Srei group and TTSL in April 2016 for Rs 7,600 crore. After merging Viom’s 42,000 telecom towers with its India operations, ATC had a stake of 65 percent in the joint venture and the Tata group had 26 percent. The rest was held by IDFC and Macquarie, which kept their Viom shares through the ATC acquisition. At the time the deal was being concluded, ATC chairman James Taiclet had told ET the company had committed $2 billion (Rs 13,000 crore), apart from the upfront cash payment, as part of buying Viom. About Rs 5,100 crore of that was toward Viom’s debt and the rest was the estimate for remaining payouts to fully acquire the Indian operations.
Under the share purchase agreement, the Tata group has the right to sell its shares in the venture and ATC is obliged to buy at least half of this holding by April 2018. It is obliged to buy the rest by April 2019.
ATC has been aggressively expanding its operations in India through acquisitions. Last month, Boston-headquarted ATC announced agreements to buy 20,135 telecom towers held by Vodafone India and Idea CellularBSE 0.11 % for about Rs 7,850 crore ($1.2 billion).
