Vodafone, Idea announce tower biz sale
In a latest industry development, Idea Cellular (IDEA) and Vodafone India announced that the two companies have separately agreed to sell their telecom towers to ATC Telcom at a combined enterprise value (EV) of INR78.5b.
EV/tenancy of INR2.9m once the merger goes through
IDEA and Vodafone have a combined portfolio of ~20,000 towers, with a 1.65x tenancy ratio (i.e. 33,000 tenancies). Post the Vodafone-Idea merger, ~6,300 duplicate tenancies will be terminated over two years without any exit penalties. This implies EV/tower of INR3.9m and EV/tenancy (adjusting for tenancy cut) of INR2.9.
Deal valued at ~6% discount to Bharti Infratel Bharti Infratel
is valued at EV/tower of INR8.1m and EV/tenancy of INR3.1m, with a 2.4x tenancy ratio. Thus, the deal is valued at ~6% discount to Bharti Infratel.
Idea valued at EV/EBITDA of 11.6x/9.2x on FY18/19E
The tower business sale will help reduce the combined entity’s net debt of ~INR1,100b by ~7%, in line with our estimate. Also, the sale of Idea’s 11% stake in Indus should generate INR100b (benchmarking to ATC sale value). Vodafone-Idea is valued at EV/EBITDA of 11.6x/9.2x, factoring in the sale value. We believe that the EBITDA synergies in FY20E could make the stock compelling at 7.3x EV/EBITDA.
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