American Tower to buy telecoms masts from Idea, Vodafone for $1.2 billion

Idea Q2 vs Q1

In the event that the completion of the sale of the standalone tower businesses precedes the completion of the proposed merger of Vodafone India and Idea, Vodafone India will receive Rs 3,850 crore ($592 million) and Idea will receive Rs 4,000 crore ($615 million). Stock of Idea was trading 5.62 per cent down at Rs 91.60 on the BSE in early trade. Further, SG&A associated with the assets is expected to be less than Rs 1 billion (approximately $10 million) for the first year.

Both Idea and Vodafone are inching closer to completing a $23 billion merger that is set to create India's largest mobile phone company that leapfrogs Bharti Airtel.

"In the long term, we have a positive view on Idea and the deal could be viewed as a positive move with the 40 billion rupee-transaction value aiding Idea in cutting down its balance sheet debt", said Gaurang Shah, Head Investment Strategist at Geojit Financial Services. It will have nearly 400 million customers with 35% customer and 41% revenue market share.

As part of the merger deal agreed in March, Vodafone India and Idea are selling the masts they own separately from their Indus Towers joint venture. Its offers of free voice calls and data plans, which continued for months, eroded the revenue and profits of competitors such as Idea and Bharti.

Vodafone and Idea have a combined portfolio of around 20,000 towers with a combined tenancy ratio of 1.65x as at 30 June 2017.

The merged entity will avoid payment of exit penalties as the combined standalone tower businesses will collapse into single tenancies over a two-year period. The transactions are expected to be immediately accretive to AFFO per share, are subject to customary closing conditions and regulatory approval and are expected to close in the first half of 2018.

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