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April 24, 2024

Airtel Eyes Control with Potential Acquisition of Vodafone’s Stake in Indus Towers

Airtel, India’s second-largest telecommunications company, is reportedly in talks to acquire Vodafone’s 21.05% stake in Indus Towers, according to a report by the Economic Times (ET). If successful, this move could potentially give Airtel a controlling interest in the tower company.

The acquisition could be a strategic move for Airtel, as it seeks to strengthen its position in India’s telecom market. The report suggests that if Vodafone Plc proceeds with the sale, it might inject funds into Vodafone Idea (Vi), its struggling telecom venture in India, in partnership with the Aditya Birla Group.

However, negotiations have hit a snag due to valuation disagreements. Airtel is hesitant to acquire Vodafone’s stake at the current market price of Indus shares, which have surged by over 77% since January. Instead, Airtel is aiming for a valuation closer to Rs 210-212 per share, similar to the price at which US private equity fund KKR and Canadian pension fund CPPIB sold their shares in February 2024.

Airtel currently holds the largest stake in Indus Towers at 47.95%, followed by Vodafone Group at 21.05%, with the remaining 30.97% held by the public. If Airtel were to acquire Vodafone’s stake, its ownership in Indus would rise to 69%.

While the exact details of the deal remain uncertain, Airtel’s potential acquisition of the 21.05% stake would cost approximately Rs 20,402.37 crore based on current market valuation. However, Airtel is pushing for a lower valuation of around Rs 12,026 crore, based on its desired share price range.

Meanwhile, Vi’s CEO Akshaya Moondra mentioned that the proceeds from the recently concluded Rs 18,000 crore follow-on public offer (FPO) would not be used to settle dues owed to any promoter or promoter group entity, hinting at Indus. He stated that Vi plans to settle vendor dues using cash flows from operations without specifying a timeline for clearing Indus’ dues.

Vi, which contributes 35-40% of Indus Towers’ revenue, still owes approximately Rs 10,000 crore to Indus Towers, according to Ambit Capital. However, Vi has begun addressing its substantial dues, which has positively impacted the tower company’s net profit in the fiscal third quarter.

As of December-end, Indus Towers operated 211,775 towers, with Bharti Airtel and Vi as its primary customers. This potential acquisition by Airtel could significantly reshape the telecom infrastructure landscape in India, consolidating Airtel’s position as a key player in the industry.

Despite the ongoing negotiations and valuation disputes, the outcome of the deal could have far-reaching implications for both Airtel and Vodafone, as well as for the broader telecom sector in India. Business Standard could not independently verify the report, but the developments are closely watched by industry experts and stakeholders alike.

Jhumpa Lahiri

Jhumpa Lahiri

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