MUMBAI: Aditya Birla group-owned Idea CellularBSE 1.81 % is in discussions with its second-largest shareholder, Axiata of Malaysia, for selling its towers to the Malaysian company, but the deal could get stuck over valuation of assets.
Two persons familiar with the development said Idea was looking to divest its 9,400 towers to raise funds for capital expenditure, licence renewals, as well as purchase of airwaves. In the past, Axiata had broached the option of a stock swap deal but Idea prefers to cash out, even at a slightly lower valuation, said one person aware of the development.
A team from Axiata is scheduled to arrive in India in the next few weeks to take the negotiations further. While the two companies have been in discussions for the past many months, it is possible that the talks could convert into a concrete deal agreement during this visit. Merrill Lynch is one of the banks involved in the possible transaction.
Another source said given the subdued market conditions, the deal could be undone as Idea may not get the right price.
"This market is not conducive to any deal," said this person, who did not wish to be named. Recently, American Tower Corp has been in talks with TowerVision India to purchase towers at around Rs 40 lakh per installation.
However, the Idea towers may command lower valuation as they house only Idea base stations and have very few other tenants, said an industry expert who did not wish to be named. An Idea spokesperson declined comment while the spokesperson for the Malaysian company said it did not comment on speculative reports. Axiata plans to create a tower company that will span countries across South Asia, including Bangladesh, Sri Lanka, Indonesia and India. The objective was to have around 100,000 towers across the region and then publicly list the entity.
But the Malaysian company is not interested in running the towers itself and has spoken to third-party tower management companies, including Tata Group-owned Viom Networks, for outsourcing the management of these installations. Axiata's plans for the tower entity are being spearheaded by the Malaysian company's Chief Executive, Jamaludin Ibrahim. The organisation that was formerly known as Telekom Malaysia International holds around 20% in Idea Cellular, acquired in a three-way merger with Spice Telecom in 2008.
India has around 300,000 privately held telecom towers, and Idea is a shareholder in the country's largest tower company, Indus Tower, along with Bharti AirtelBSE 0.86 % and Vodafone India. Indus Tower was formed by merging the tower businesses of the three companies in 16 regions where they all had a common footprint. The towers that remain with Idea and are currently under discussion are located in states where Indus does not have operations.
The telecom towers business witnessed hectic consolidation a few years ag, but has slowed down in the last couple of years as lack of decision-making and increasing litigation have held up expansion at most telecom companies over the last couple of years. The cancellation of licences of new entrants by the Supreme Court in 2012 also resulted in a decrease in the demand for towers.
But the tower sector is expected to boom over the next five years as networks proliferate to deliver Internet services through wireless technologies like 3G and 4G. The tower industry also stands to gain significantly from the impending launch of 4G services by Mukesh Ambani-owned Reliance Jio Infocom.