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 United States company in a market seeing massive 4G rollouts.
Both the telecom companies are in the process of merging their operations, which is expected to be completed next year and will displace Bharti Airtel as country's largest telecom operator.
In the event that the completion of the sale of the standalone tower businesses precedes the completion of the proposed merger of Vodafone India and Idea, Vodafone India will receive Rs 3,850 crore ($592 million) and Idea will receive Rs 4,000 crore ($615 million).
Vodafone Business Services, the enterprise services arm of Vodafone India, is contributing 19% of the company's total revenue or Rs 3610 crore approximately.
"Both Vodafone India and Idea as customers, and ATC TIPL as a mobile network infrastructure provider, have agreed to treat each other as long-term preferred partners, subject to existing arrangements. We are making good progress in securing requisite approvals for our merger with Idea Cellular and in monetising our tower assets".
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American Tower, which agreed to take control of Indian masts operator Viom in 2015 for 76 billion rupees, has been steadily expanding its presence in India - the world's second biggest wireless market with 1.2 billion mobile subscribers. The merger is on track and is expected to complete in calendar year 2018, said a company statement.
Vodafone India and Idea Cellular are selling their standalone telecom tower businesses to ATC Telecom Infrastructure Pvt.
Revenue was down 20.3 percent on a year ago at 75.11 billion rupees, while average monthly revenue per user fell 6.4 percent from the previous quarter to 132 rupees.
The entry of Reliance Jio in the telecom sector has led to a wave of consolidation as the financials and margins of existing players have come under enormous pressure.