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International Research Journal of Modernization in Engineering Technology and Science

( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:04/Issue:03/March-2022 Impact Factor- 6.752 www.irjmets.com
BHARTI INFRATEL AND INDUS TOWERS MERGER DEAL
Rachna Soni*1, Priyanka Kataria*2, Priya Rana*3
*1Assistant Professor, Commerce Department, Shivaji College, University Of Delhi, New Delhi, India.
*2Junior Associate, State Bank Of India, New Delhi, India.
*3Assistant Professor, Commerce Department, SD College, Kurukshetra University,
Ambala Cantt., India.
ABSTRACT
Mergers, sometimes, become the need of the hour. They are very common in corporate sectors. This paper talks
about one such merger of Bharti Infratel Ltd. and Indus Towers Ltd., both of which are tower infrastructure
companies. The merger process completed on 19th November 2020, although it was announced two years back
in 2018. The basic idea behind the Merger was to cut stake in the tower business and fund core operations, to
match the competition created by the emergence of Reliance Jio in telecom sector. The merged entity now has
expanded the paidup equity capital to Rs. 26,949,369,500. Vodafone Idea exited by selling its 11.15% stake in
Indus Towers Ltd. for Rs. 3,760 crores. The name of new merged entity has been decided to be Indus Towers
Ltd. and it is listed on BSE and NSE stock exchanges. Post-merger, Bharti Airtel holds 41.6% stake (in merged
entity) while holdings of Vodafone group stand at 28.12%. The merger of Bharti Infratel and Indus Towers is
expected to help unlock value and achieve economies of scale for both the companies.
Keywords: Merger, Bharti Infratel, Indus Towers.
I. INTRODUCTION
The spectrum of this paper revolves around one of the biggest mergers, which is of Bharti Infratel and Indus
Towers Ltd. The Merger and Acquisitions (M&A) is a process of consolidating two or more companies or assets
of two or companies via different ways. Often, the terms Merger and Acquisition, are used interchangeably but
they are different in meaning. Under Acquisition, one company acquires the ownership of the other company by
purchasing it, whereas a Merger is the combination of two firms, forming a new entity under a common
corporate name.
The merger of two big telecom infrastructure companies aims at creating world's largest tower company
outside China. Although the merger was scheduled 3 years back in 2018 but got completed only in 2020. This
paper brings out the after math of this delay and some important consequences of the mega merger.
 Bharti Infratel Ltd. - Bharti Infratel limited was incorporated in 2007, July by its parent company Bharti
Airtel. It is a telecommunication infrastructure company, which aims to provide infrastructure services like
telecom towers, fibre networks and other related infrastructure services. As of 2020, Its net worth is INR
6817.7 crores.
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Note-Bharti Airtel and its wholly owned subsidiary, Nettle Infrastructure Investments Limited have
33.5% and 19.9 % shareholdings respectively, which sums upto 53.5% of total stakes.
 Indus Tower - Indus Tower ltd was incorporated in 2007, November. Idea behind its incorporation was to
make shared telecom infrastructure available to telecom operators. Indus tower ltd has the widest coverage
in India with 15 circles across the country, with a 27% market share .
II. WHY MERGER?

Bharti Airtel Ltd., Vodafone India Ltd. and Idea Cellular Ltd. were looking forward to cut their stake in the tower
businesses, to fund their core business operations as these companies were finding it difficult to pay their huge
AGR (Adjusted Gross Revenues) dues to the government. This was one of the reason why Vodafone-Idea (Vi)
sold its stake in Indus Towers and exited out of the merger receiving a cash payout, which will help in paying
some part of its AGR dues. Another major reason of deciding to focus on core business operations was the
pressure created by Reliance Jio increasing market share. Their earnings were, thus, shrinking and under
pressure. This mega merger of Bharti Infratel Ltd. and Indus Towers Ltd. is expected to help unlock value for
both the companies.
III. MERGER AND ITS CONSEQUENCES
The merger of Bharti Infratel limited and Indus Towers limited recently got completed in November 2020. The
combined entity is renamed ‘Indus Towers Limited’ with more than 1,69,000 towers across 22 telecom service
areas in India. It has become the world's largest telecom company outside China. After the merger, the
emulsified entity also experienced the expansion in paid up equity which was increased to Rs. 26,949,369,500
(2,694,936,950 equity shares of Rs. 10 each, fully paid up). Bimal Dayal has been appointed as the CEO of the
merged entity and seven directors have resigned from the Board of the company, with effect from the
conclusion of the Board meeting. The combined entity’s tower share in the tower market will be close to 35
percent and It’s share in the tenant market will be close to 45-48 percent, according to the data compiled by
Bloomberg Quint.
Bharti Infratel along with Idea cellular and Vodafone group gave its nod to merge Bharti Infratel ltd. with Indus
Towers ltd more than two years back in April 2018. But the merger was rescheduled five times. Initially the
date for the merger was in October 2019 which was then extended till December and then again delayed till
February 2020 and then due to lockdown and several other reasons got delayed again and again.

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For its 11.15 per cent shareholding in Indus, Vodafone Idea has received cash consideration of ₹3,760.1
crore and the new holding structure of merged entity is as follows:
INDUS TOWERS LTD (MERGED ENTITY)

[CATEGOR
Y NAME] [CATEGORY
[PERCENTA NAME]
GE] [PERCENTA
GE]
[CATEGORY
[CATEGORY NAME]
NAME] [PERCENTA
[PERCENTA GE]
GE]
 Limited Synergies
Merger of these two telecom companies will come forward with limited synergies in operating expenditure due
to limited overlap in operations. Both the companies have overlapping operations in only four circles out of 22
including Haryana, West U.P, East U.P and Rajasthan. According to CLSA even a 10% or so reduction in
employee and other costs in overlapping operations could lead to about 3% higher earnings.
 Impact of Delay
The merger was announced in 2018 and completed in 2020, so this delay impacted a few things as follows,
 Reduction in no. of shares issued - The no. of shares issued by Bharti Infratel in favour of the shareholders
of Indus towers ltd was 1,565 shares for every single share. Bharti Infratel will now be issuing 1,517 shares
for every one share of Indus towers ltd due to changes in business environment.

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Issuing fewer shares which will lead to lower dilution, which is in favor of Bharti Infratel. This is because over
the past two years Indus Towers’ financials have worsened more compared to Bharti Infratel. Indus Towers has
not only reported a reduction in its cash flows, but its operating margins have also dropped due to a higher
number of tenancy losses.
 Reduction in Tenancy Ratio - The tenancy ratio, when the merger was announced (2018) stood up to 2.25
times whereas as at the time of merger i.e in 2020, the tenancy ratio has been reduced to 1.84 times.
The basic reason behind the fall in number of tenants was the merger of Vodafone India Limited and Idea
Cellular Limited. However the same is not visible if we compare EBITDA and reported revenue of both time
frames i.e 2018 and 2020. This is majorly due to increase in the rental rates as well the operator has been
receiving exit penalties from canceled tenants. Apart from this IND-AS 116- the new accounting standard has
also helped in boosting the profit for financial year 2019-2020
Consolidations in telecom sector are not a new thing. Currently there are only three major operators left in
telecom space. The consolidation of Bharti Infratel and Indus tower ltd will fetch in several new and great
opportunities to grow but this will not be as easy as it seems. One of these 3 major telecom operators, reliance
Jio has created its own tower InvIT and is adding more towers through this. With less number of competitors
and few new tenancies, growth opportunities look slim
 Vodafone Idea –. Vi sold 11.5% of its stake in Indus towers as part of efforts to shore up its strained
finances and to clear the remaining part of AGR-related dues. The valuation multiple of Bharti Infratel
,which is a listed entity, was used to derive the equity value of Indus Towers Ltd, since it is an unlisted
entity. The delay in merger costed them close to 2500 crores because of sharp fall in share prices of Bharti
Infratel.
o Earlier at the time of announcement the stakes were valued at around 6500 crore but now the company has
received a cash consideration of Rs 3760 crores only. Out of which it has paid 2400 crore to merged entity
towards settlement of dues.
o Even with a favorable payout time in the AGR case, the company has been struggling in the face of
competition from bigger rival and long-term survivability of Vodafone Idea under the cloud. The company
possesses nearly 33% tenancies in the combined entity.
o The company have entered into certain security arrangements with VIL and Vodafone Group to secure the
payment obligation of VIL under the master service agreement
o This special security arrangements includes
 a pledge of a certain number of shares of Vodafone ltd in the merged firm.
 a security deposit by Vodafone Idea
 a corporate guarantee by Vodafone group, which can get triggered in certain situations and events.
o The master service agreement will provide a payment cover to Indus towers ltd (merged entity) of over one
year for the operational payments due from VIL.

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 Reduction in savings - As against an annual benefit of 560 crores, which was estimated at the time of
merger announcement. It is found that, out of this 560 crore, 500 crore was due to cascading effect of DDT
which has been resolved in the new tax regime hence reducing the benefits of merger.
IV. RESULTS AND DISCUSSION
Since the merger has been completed now and the merged entity is named as "INDUS TOWERS LTD" with effect
from 10 December 2020, some after effects of this merger are listed below:
 Bharti Infratel stocks surge 28% in 3 days after completion of Indus Tower merger deal
 Just few days after the merger, Bharti Airtel, through its wholly owned subsidiary Nettle Infrastructure
Investments Ltd, bought an additional 4.94% stake in the new merged entity for Rs. 2,882 crores. Now, the
total stakes of Bharti Airtel in the Indus Towers Ltd. stands increased to 41.6% from 36.73%.
 Earlier it was expected and stated in many articles that this merger is not going to be a great success in
terms of profits. But in quarter 3, profit of merged entity has been hiked 2% at 1360 crores.
V. CONCLUSION
The combined entity has become the second largest Tower infrastructure company in the world after China and
covers all 22 Tower circles in India. The merger of Bharti Infratel and Indus Towers will help unlock value and
achieve economies of scale. In this paper we have tried to analyze all the bits and pieces of this mega Merger.
The delay in the completion of merger has brought about a Paradigm shift in the financial statements of the
merged entity with mixed response from analysts. Although the post-Merger financials shows profit for the
quarter ended in December 2020 in which the merger took place on 19 November 2020, therefore comparison
with last year statements will not be fully justified. A reduced stake of Bharti Airtel and Vodafone Plc will make
the merged entity more independent and reduction in conflict of interest as customers and owner are same as
of now. Apart from this, the merged company might see some synchronization on capital expenditure. So, some
benefits may be expected in medium to long term after the operations have been put in place correctly and
other required changes have been made.
VI. REFERENCES
[1] Hayes, A. (2021, March 16). Mergers and Acquisitions (M&A). Investopedia.
https://www.investopedia.com/terms/m/mergersandacquisitions.asp
[2] Wikipedia contributors. (n.d.-a). Bharti Infratel. Wikipedia.
https://en.wikipedia.org/wiki/Bharti_Infratel
[3] Wikipedia contributors. (n.d.-b). Indus Towers. Wikipedia.
https://en.wikipedia.org/wiki/Indus_Towers
[4] Sarkar, S. (2020, September 1). Bharti Infratel-Indus Merger Completes with No Major Benefits.
Capitalmind.https://www.capitalmind.in/2020/09/bharti-infratel-indus-merger-completes-with-no-
major-benefits/
[5] Sarkar, S. (2018, April 26). Bharti Infratel-Indus Tower Merger Explained. BloombergQuint.
https://www.bloombergquint.com/business/bharti-infratel-indus-tower-merger-explained
[6] B.Q. (2020, September 1). Bharti Infratel To Proceed With Indus Tower Merger Plan. BloombergQuint.
https://www.bloombergquint.com/business/bharti-infratel-to-proceed-with-indus-tower-merger-
plan
[7] ET Bureau. (2020, November 23). Bharti Infratel-Indus Towers merger offers limited synergy savings:
Analysts. The Economic Times. https://economictimes.indiatimes.com/markets/stocks/news/bharti-
infratel-indus-towers-merger-offers-limited-synergy-savings-
analysts/articleshow/79373161.cms?from=mdr
[8] Telecom, E. T. (2020, November 20). Vodafone Idea gets Rs 3,760 crore by selling 11.15% stake in
Indus Towers after merger with Infratel. ETTelecom.Com.
https://telecom.economictimes.indiatimes.com/news/vodafone-idea-gets-rs-3760-crore-by-selling-
11-15-stake-in-indus-towers-after-merger-with-infratel/79308231
[9] Manchanda, M. (2020, December 2). Bharti Airtel hikes Infratel holding by 4.9%, stake reaches 41.6%.
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Business Standard.
https://www.business-standard.com/article/companies/bharti-airtel-hikes-infratel-holding-by-4-9-
stake-reaches-41-6-120120201499_1.html
[10] Guha, I. (2021, January 28). Indus Towers Q3 net profit up 2% at ₹1,360 crore. LiveMint.
https://www.livemint.com/companies/company-results/indus-towers-q3-net-profit-up-2-at-rs-1-
360-crore-11611850068797.html
[11] Our Bureau. (2020, November 19). Bharti Infratel, Indus Towers complete merger process. Hindu
business line.
https://www.thehindubusinessline.com/info-tech/bharti-infratel-indus-towers-complete-merger-
process/article33135455.ece
[12] Ramarathinam, A. (2020, December 3). Airtel buys 4.9% stake in Bharti Infratel for ₹2,882 cr. Live
Mint.
https://www.livemint.com/industry/telecom/airtel-buys-4-9-stake-in-bharti-infratel-for-2-882-cr-
11606963136069.html
[13] Reporter, S. I. (2020, November 24). Bharti Infratel up 28% in 3 days on completion of Indus Tower
merger deal. Business Standard. https://www.business-standard.com/article/markets/bharti-infratel-
gains-28-in-3-days-on-completes-of-indus-tower-merger-deal-120112400212_1.html

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International Research Journal of Modernization in Engineering Technology and Science

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II. WHY MERGER?

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INDUS TOWERS LTD (MERGED ENTITY)

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