Voda Essar plans to sell 7,000 towers

Vodafone Essar, India’s third-largest cellphone operator by subscribers, plans to sell its 7,000 towers across seven circles, an industry executive aware of the development told ET Now.

GTL Infrastructure and Tata Quippo (rechristened Viom) are learnt to have evinced interest in acquiring Vodafone Essar’s towers in these seven circles. Vodafone Essar’s towers and other physical infrastructure in rest of the country are held by Indus Towers, a three-way joint venture between Bharti Airtel, Vodafone Essar and Idea Cellular that manages towers in 16 telecom circles.

The executive quoted above said Vodafone Essar plans to hive off its 7,000 towers outside Indus into a separate company and added that bids for this sale are likely to be tabled next week. A spokesman for Vodafone Essar, majority owned by Britain’s Vodafone Group, refused to comment on the development. Essar Group also declined to comment.

The deal size, according to analysts, could be over Rs 2,000 crore, given the benchmark valuation of around Rs 35-40 lakh per tower. However, the valuations will factor in tenancies of these towers, said a Mumbai-based telecom analyst.

It is also learnt that Vodafone Essar may also look at an alternative route wherein its standalone towers could be merged with Indus Towers. In return, Vodafone would get an option of increasing its stake in Indus. Vodafone currently holds a 42% stake in Indus Towers while Bharti and Idea hold 42% and 16%, respectively. Indus Towers is the largest tower company in the country with over 1,10,000 towers in its portfolio.

“The cash would come in handy for Vodafone. It would need at least Rs 4,000-5,000 crore to roll out its 3G services across the country,” said a telecom analyst. Vodafone has invested around Rs 12,000 crore in acquiring 3G licences across 12 circles. While it does not make much sense for Vodafone to continue holding a small portfolio of towers, according to analysts, it augurs well with the strategy of telecom tower companies like GTL and Viom that are looking at consolidating their position in this space.
India has a subscriber base of 621 million, and according to COAI, the industry lobby representing GSM players, the cellular connections are expected to increase to 1,019 million by 2013. Analysts estimate that the country will require some 4.6 lakh towers to meet the network coverage requirements of all operators and with the onset of 3G licenses, a huge transition is expected from voice to data services which will increase tenancies on these towers.