Vodafone, Idea to sell tower business to ATC Telecom Infrastructure

Vodafone India and Idea Cellular on Monday said they have agreed to sell the roughly 20,000 towers that they directly own to a local arm of American Tower Corp. for $1.2 billion (Rs 7,850 crore) cash, a move which will help the two merging telcos pare debt while boosting the tower portfolio of the USA company in a market seeing massive 4G rollouts.

"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.

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. The deal is expected to close in 2018.

Vodafone Business Services, the enterprise services arm of Vodafone India, is contributing 19% of the company's total revenue or Rs 3610 crore approximately.

Reliance Jio Infocomm, a telecom venture controlled by billionaire Mukesh Ambani, entered the market late previous year with free voice and cut-price data, forcing incumbent carriers to drop prices even though their margins took a hit.

Idea, the third-biggest Indian network operator by revenue and subscribers, said on Monday it suffered a net loss of 11.07 billion rupees in its second quarter ended September 30, which compared with a net profit of 915 million rupees in the same period past year but was less than the 11.25 billion-rupee loss expected on average by analysts.

The competition drove small carriers out of business and also sparked off consolidation in the sector.

Shares in Idea closed 3.8 percent lower at 93.35 rupees, while the Mumbai market index was down 0.94 percent.

"The stock decline this morning is only sort of a knee-jerk reaction to the quarterly loss", Geojit analyst Shah said.

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