Cementing Tower Ties

Two telecom companies in need of some serious funding come together for
future expansion with this merger. Raising funds in the current financial and
economic turmoil has made lives of telcos miserable. Tata Teleservices was in
need of funds for its future expansion, while Quippo Telecom Infrastructure has
been looking at increasing presence.

The merger of the tower business will create India's largest independent
telecom infrastructure company with 18,000 towers and an enterprise valuation of
Rs 13,000 crore. The recent consolidation efforts by TTSL's
competitors-Vodafone, Bharti Airtel and Idea Cellular have prompted TTSL and
Quippo to tie the knot.

The country will add close to 100 mn new mobile customers in 2009. The merger
will assist both Quippo and TTSL to achieve economies of scale and better future
valuations if new operators are going ahead with their earlier plans. However,
conservative approach by the Tatas may be fatal for the Kanorias, the promoters
of Quippo, to take the telecom tower business to the next level.

The silver lining is that though TTSL will have a 51% stake in the combined
entity, the management will be Quippo's existing team. This may, to a certain
extent, help the merged company to grab more market share, and it will be free
from the hands of a the telecom service provider.

“This largest independent tower company will organically grow into an entity
with over 50,000 towers by 2012. It will hold the largest tenancy ratio in the
Indian telecom space as well,” says Arun Kapur, MD, Quippo Telecom
Infrastructure.

Left to Right: Anil Sardana, MD Tata Teleservices and Sunil Kanoria, vice-chairman and MD, Quippo Infrastructure Equipment

Recently, Quippo lapped up about 1,000 towers primarily across Punjab and
Karnataka circles from Spice Telecommunications.

Besides the growing business from TTSL, the combined entity Wireless-TT
Info-Services, needs to actively look for new operators who are yet to fine-tune
their investment plans to roll out services. TTSL currently operates in more
than 7,500 towns across 22 circles. Its GSM roll out, following the infusion of
funds from NTT DOCOMO, will be a boon for Wireless-TT Info-Services. Reliance
Communications, which has got GSM license along with TTSL, is far ahead in GSM
services with aggressive pricing in Mumbai and Chandigarh.

As part of the deal, Quippo will make an upfront cash payment of Rs 2,400
crore, and transfer its passive telecom tower portfolio of approximately 5,000
towers to Wireless-TT Info-Services. The combined entity will have more than
18,000 towers making it the largest independent tower company in India.

“This partnership presents opportunities for operators to focus on their core
competencies without worrying about the availability of infrastructure, capital
expenditure, time-to-market, etc. This will reduce risks and improve
profitability,” Kapur added.

“The deal is of strategic importance and value enhancing for all stakeholders
since it combines the management and operational capabilities of Quippo Telecom
with the support of TTSL,” says Anil Sardana, MD, TTSL.

Despite the slowdown, TTSL divested 26% stake for $2.7 bn to Japanese telecom
major NTT DOCOMO. The time has come for the Tatas to strengthen its foothold in
the telecom business too. TTSL's entry into GSM-based telecom services will be
another step in the right direction. But facing rivals such as Reliance
Communications will create tough times ahead for TTSL.

Heena Jhingan and Baburajan K

heenaj@cybermedia.co.in