Bharti Infratel and Indus Towers Merger: CCI Grants Clearance

Bharti Infratel, the tower subsidiary of Bharti Airtel, is set to undergo a merger with Indus Towers for which both the companies have obtained clearance from Competition Commission of India (CCI). Post the merger, both the companies will fuse to form $14.6 billion entity owning 1.63 lakh towers, a massive figure speaking even from global standards. This approval from CCI is the first of many which both the companies will need to have it under them if they want to move ahead with the merger. In addition to the CCI clearance both the companies will need the Securities & Exchange Board of India, National Company Law Tribunal and the department of telecommunications (DoT) to sign off on the merger. While the others will look into different aspects of the merger, DoT will sign off on the FDI aspect of the combined entity.

Bharti Airtel in its official statement said “Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, we are pleased to inform you that approval of Competition Commission of India (CCI) has been received for the proposed merger of Bharti Infratel Limited and Indus Towers Limited.”

Interestingly, the company which is going to merge with Bharti Infratel, Indus Towers counts Bharti Airtel, Idea Cellular and Vodafone India as its shareholders. As such, this merger is going to mean enhanced control over towers and monetisation of their stakes in the company during present tough times. This move might prove beneficial for all the three telcos since the telecom sector is in a condition of unrest, the reason being heavy losses and poor financials. Current stake-holding in Indus Towers comprises of Bharti Infratel (42%), Vodafone (42%), Aditya Birla’s Idea group (11.15%) and Providence (4.85%).

As per the current stipulated timeline, the merger process will finish before the end of FY 2018-19.

Idea Cellular, which holds 11.15% in Indus will have the option of getting a 7.1% stake in the new company, or it will also be able to sell out for Rs 6,500 crore. Idea Cellular had earlier said it would exit the tower unit. Being equal shareholders in Indus, Bharti Airtel and Vodafone will take control of the merged entity proclaiming equal representation in board too.

A lot of structure and stakeholding of the company will be dependent on Idea’s decision to retain or sell the shares. Depending on that, Bharti Airtel will own either 37.2% or 33.8% in the combined entity, and Vodafone will hold 29.4% or 26.7%. On the other hand, private equity major KKR and Canada Pension Plan Investment Board (CPPIB) will together own 6%. Providence will retain a minimum 1.1% or opt to maintain its full stake in the combined company, which will be 3.1%. The remaining shareholding will be up for the public.

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