GTL Infrastructure Board Approves Plan to Acquire Aircel's Tower Operation

GTL Infrastructure today announced that its board had given the go-ahead to its plan to buy 17,500 mobile towers from Aircel, a unit of Malaysia's Maxis Communications, Dow Jones reports. GTL Infrastructure, which owns and leases out telecom towers in India, will contribute up to 17.5 billion rupees in cash toward funding the acquisition, which will be done through a company to be specifically created for the deal, it said in a notice to the Bombay Stock Exchange. GTL Ltd., which owns 30% of GTL Infrastructure, said separately it will contribute up to 15 billion rupees for the acquisition. The companies did not say how they will fund the rest of the deal value or whether the transaction will include taking over any of Aircel's debt. In December last year, Dow Jones had reported GTL Infrastructure would pay about 37 billion rupees in cash and assume Aircel's debt from the tower operations as part of an around 85-billion-rupee transaction.

Outlook and Implications

• Increasing Demand for Passive Telecom Infrastructure: The deal would enable GTL Infrastructure to become one of the biggest independent tower operation companies in India. The company expects to have 15,000 towers of its own by March, taking the total number of its towers to 32,500 after purchasing Aircel's towers. As part of the deal, Aircel has committed to lease 20,000 sites from GTL Infrastructure over the next three years. GTL Infrastructure said the deal might generate up to 170 billion rupees in revenue for the company over the next five years. Demand for telecoms towers in India has been on the rise as a number of new telecoms licensees and small mobile operators seek to speed up their service roll-out and reduce network costs by leasing or sharing passive infrastructure. An increasing number of telecoms operators have spun off or sold their tower assets in order to focus on their service provision and reduce network costs by leasing towers instead.

• Room for Further Consolidation in Tower Market: Competition in the Indian tower operation market, however, is also intensifying. The passive infrastructure operation market is currently dominated by the tower companies backed by telecoms operators. Indus Towers, a joint venture among Bharti Airtel, Vodafone Essar and Idea Cellular, is the largest tower company in the country with about 100,000 towers. Reliance Infratel, a unit hived off from Reliance Communications, has around 48,000 towers. There are also several independent tower operators, which have been seeking to increase their scale by buying towers from telecoms operators. Prior to the GTL-Aircel deal, Tata Teleservices had sold 49% of its tower unit to Quippo Telecom Infrastructure for about 24 billion rupees to form a joint venture, which now has 33,000 towers (see India: 19 August 2009: Quippo, Tata Complete Merger of Tower Businesses). In addition, a number of foreign tower companies, such as U.S.-based American Tower and Crown Castle, have also been seeking to enter the Indian market through acquiring existing infrastructure from telecoms operators. American Tower was reported in December to be close to acquiring a majority stake in Essar Telecom Infrastructure, the tower unit of the Essar Group (see India: 10 December 2009: American Tower Close to Acquisition of Stake in Essar Tower Unit).