Tatas reach pact with ATC; to pay $320 million as 1-time settlement, sell 13% stake

KOLKATA: Tata Teleservices (TTSL), the mobility division of Tata Sons, will pay American Tower Corporation (ATC) $320 million (Rs 2700 crore) as a one-time cash settlement for prematurely winding up some 30,000-odd tenancies after deciding to sell its mobility business to Bharti Airtel.Tata Tele will also sell 13%, or half of its 26% holdings, in ATC Telecom Infrastructure Pvt Ltd (ATC TIPL), to the US tower company, which will also buy IDFC’s 2% stake, for a combined Rs2,940 crore, according to a regulatory filing by the tower company late Tuesday night.Effectively, this means that ATC has picked up the additional Tata and IDFC stakes for roughly Rs 240 crores. This is since ATC has paid Rs 2940 crore for buying the above stakes, but has recovered Rs 2700 crore for termination of contractual tenancies from the Tatas, said a person familiar with the matter. ATC declined to comment."The company (ATC) entered into an agreement setting forth terms and conditions for a settlement and release of certain contractual lease obligations of Tata Teleservices in India, which has historically been a major tenant. As part of this arrangement, the company will receive a one-time cash payment of approximately $320 million in Q4 2018," said ATC in its statement."Additionally, the company has received notice from Tata of exercise of put options with respect to 50% of its holdings of ATC TIPL and has also received notice from IDFC of exercise of put options with respect to 100% of its holdings of ATC TIPL," the tower giant added.After the deals, ATC will hold some 79% stake in its India operations. TTSL will have option to sell its balance 13% stake in ATC TIPL in the beginning of next fiscal year."...we're at 63% at ATC, that's going to go to 79% in the first foot of this Tata share and then we'll decide where we go from that," said Jim Taiclet, American Tower’s chief executive officer in an earnings call.This settlement is crucial for the Tata group to close its agreement with Bharti Airtel which made it clear that the conglomerate would need to clear all liabilities from earlier pacts. The telco entered a "cash free debt free" deal with Sunil Mittal-owned Bharti Airtel this year and is in a rush to complete the deal, which is yet to get all regulatory approvals.These deals will help the US tower firm strengthen its position in India."...we reached a comprehensive agreement with the Tata Group that we believe preserves our ability to achieve our long-term return on investment objectives in India. We expect that this agreement, along with the acquisition of approximately 20,000 Vodafone and Idea towers earlier this year, will position American Tower to benefit from the anticipated recovery in the Indian mobile market," said the chief executive officer in the company statement.Taiclet in the earnings call reiterated the importance of the buys, saying that the deal will help the tower firms "investment criteria for our India business".ATC TIPL, the second largest private telecom tower firm in India holding on to about 78,000 towers, bought about 51% stake in Viom from Tata Teleservices Ltd and SREI Infrastructure Finance for Rs 7,635 crore. ATC then renamed the firm as ATC Telecom Infrastructure Private Limited.TTSL's stake in Viom Networks came down to 26% after ATC became the major stakeholder and merged its Indian business. ATC later merged its wholly-owned subsidiary with ATC TIPL which increased its shareholding in the tower firm to 63%. The rest of the stake in ATC TIPL is held by Tata Sons, Tata Teleservices, IDFC Private Equity Fund III, Macquarie SBI Infrastructure Investments Pte Limited and SBI Macquarie Infrastructure Trust.The Boston-based tower company has made huge bets in India, expanding its portfolio of towers aggressively through acquisitions. But the rapid consolidation in the telecom market, due to a brutal price war, has hurt the company.“Certain wireless carriers in India are in the process of, or have recently concluded, merging their operations or exiting the marketplace. The company’s operational and financial results during the third quarter of 2018 were impacted by churn driven by this carrier consolidation process,” ATC said.It added that it expects the impact of consolidation in the Indian telecom industry "to last for several years" and "will return to lower levels once the consolidation process is complete".Its full year 2018 outlook estimated impact of churn on property revenue, adjusted EBITDA and consolidated AFFO at approximately $200 million, $135 million and $110 million, respectively, inclusive of an expected reduction in pass-through revenue of approximately $60 million."These impacts reflect an increase of $20 million as compared to the company’s prior outlook due to incremental churn associated with the Company’s settlement with Tata," said the firm.

from Economic Times https://ift.tt/2Rro8L4