Bharti Airtel, the country’s largest mobile service provider is looking to sell the management control of its passive infrastructure business, Bharti Infratel. Bharti Airtel Chairman Sunil Mittal had earlier said the company would sell 51 per cent stake over the next two years. According to investment bankers, a clutch of private equity funds and Anil Dhirubhai Ambani Group (ADAG)-controlled Reliance Communications are likely to be in the race.
Bharti Infratel is the largest tower infrastructure company in the country with over 40,000 towers. Bharti and Reliance Communications have already hived off their passive infrastructure units, including towers, shelters, generators and battery back-ups, into separate subsidiaries. Reliance, which recently sold 5 per cent stake of its tower business to seven private equity investors, valued its tower assets at $6.7 billion.
“Vodafone is another possible player. Global players like Crown Castle and American Towers are also other possible candidates,” an analyst said. A Reliance and Hutch Essar spokesperson declined to comment.
However, sources close to Reliance said the company was exploring options to buyout Bharti’s tower business. “They may tie up with couple of private equity players or bid by their own,” sources said.
The government has asked telecom operators to share their infrastructure network with other carriers, enabling penetration in rural areas. Bharti is planning to build 20,000 towers by this year-end to take its total towers across the country to 65,000. The company is spending about $3.5 billion towards capital expenditure, including network expansion. It already has an infrastructure sharing agreement with Hutch and Idea.
According to analysts, valuations of tower companies are moving up mainly due to expansion of the mobile telephony market. “Tower and passive infrastructure business are valued at 20-30 per cent of the total valuation of the company. This depends on the tenancy ratio of towers,” a Mumbai-based analyst working with Credit Suisse said. Tenancy ratio is estimated based on the number of telecom operators sharing a particular tower.