In the biggest foreign direct investment in the telecom sector during the current financial year, US-based American Tower Corporation announced on Wednesday that it has agreed to buy a 51 per cent controlling stake in telecom tower firm Viom Networks for Rs 7,635 crore in an all-cash deal.
Viom currently owns and operates approximately 42,200 wireless communications towers and 200 indoor distributed antenna systems across India.
At closing, Tata Teleservices Limited will retain a part of its holding, with Macquarie SBI Infrastructure Investments Pte Limited, SBI Macquarie Infra-structure Trust and IDFC Private Equity Fund III retaining certain interests. Under the agreement, American Tower may acquire or be required to acquire all or a portion of the remaining 49% ownership stake in Viom, according to an ATC statement.
Additionally, the parties have agreed that, post-closing, American Tower 's existing Indian portfolio of approximately 14,000 towers will be merged with Viom, resulting in certain ownership adjustments.
"With a population of nearly 1.3 billion people, rapidly growing smartphone penetration and limited fixed line infrastructure, India's vibrant wireless industry is poised for a sustained period of network investment," said James D Taiclet Jr., American Tower's Chairman, President and Chief Executive Officer.
"ATC India's greatly expanded portfolio of towers will enable us to play a key role in providing the communications real estate essential to the deployment of advanced wireless technologies throughout the country and to support the Indian government's Digital India Initiative," he added.
Commenting on the transaction, Ishaat Hussain, Director, Tata Teleservices Limited, said "This partnership with ATC presents an opportunity for Tata Teleservices to leverage an enhanced infrastructure portfolio to better address the rapidly expanding market for next generation data services in India."
Sunil Kanoria, Chairman and Managing Director of Viom and Vice Chairman of SREI Infrastructure Finance Limited said, "We are pleased to have found a new management team for Viom, and believe that ATC is well positioned to continue to optimize these assets given its proven track record of success." From SREI's perspective, the divestment of Viom will have a multi-fold impact for SREI improving profitability and will be accretive for both shareholders and SREI.
American Tower anticipates consolidating the full financial results for Viom after the closing of the transaction.
During the quarter ended June 30, 2015, Viom generated the following annualized results: approximately Rs 5,000 crore in rental and management revenue and approximately Rs 2, 100 in gross margin. In addition, as of September 30, 2015, Viom had approximately Rs 5,800 billion of rupee-denominated debt outstanding. American Tower expects the transaction to be immediately accretive to AFFO per share.
Amit Sharma, American Tower's Executive Vice President and President, Asia, added, "Through our joint ownership with the Tata Group of over 56,000 towers, American Tower will be strategically positioned to benefit from the leasing revenue growth opportunities that will come from the accelerating deployment of 3G and 4G technologies by all of the wireless carriers in the market."
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