ATC India Sold! $2 Billion Deal Rocks Telecom Landscape

5 Jan 2024 , 11:08 AM

In a $2.5 billion all-cash agreement, Canada’s Brookfield has defeated Miami-based infrastructure investment group I Squared Capital to purchase the entirety of the India division of Boston-based American Tower Corp (ATC). Friday is the day that the two parties will sign.

‘In an official statement released on Friday, ATC stated that it has reached a definitive agreement with Data Infrastructure Trust (‘DIT’), an Infrastructure Investment Trust supported by an affiliate of Brookfield Asset Management, under which DIT will purchase all of the equity interests in American Tower Corp’s operations in India (ATC India).’

Brookfield’s telecom tower operations in India are currently housed under DIT under the names Summit Digitel and Crest Digitel. This will be the third acquisition made by Brookfield in the Indian telecom market.

The telecom tower operator based in Boston stated that, subject to certain pre-closing arrangements, the total cash proceeds to ATC at closure could potentially amount to up to $2.5 billion at current exchange rates. The transaction is anticipated to occur in the second half of 2024 and represents the conclusion of the previously disclosed strategic evaluation of ATC’s activities in India. Customary closing conditions, such as governmental and regulatory approvals, apply.

The enterprise value of the ATC India operations is estimated to be $2 billion (about Rs 16,500 crore), and the total cash proceeds also include a ticking charge that will be paid from October 1, 2023, to the closure date. The enterprise value proceeds are linked to the assumption of the current India term loan by DIT and the redemption of existing intercompany debt, according to ATC.

We are excited to add more telecom towers to our portfolio in India, which will allow us to offer our partners and clients a wider range of options. Arpit Agrawal, Managing Director, Head of Infrastructure, India & Middle East, at Brookfield, stated in an official statement, ‘We remain deeply committed to empowering digital connectivity and transforming the telecom infrastructure landscape across the region through strategic acquisitions like ATC India.’

Additionally, and taken into account within the aforesaid total possible cash flows, ATC will be entitled to future payments linked to existing ATC India receivables as well as the full economic advantage associated with the optionally converted debentures (OCDs) issued by Vodafone Idea.

The transaction’s proceeds are anticipated to be utilised to pay off ATC’s current debt.

ATC has received financial advice from CDX Advisors and Citi, respectively, in the role of lead financial advisor. American Tower has appointed Talwar Thakore & Associates (TT&A) as its primary legal advisor.

Prior to this, in late 2018, I Squared Capital signed an exclusivity agreement with ATC to finalise the details of acquiring a roughly 65% share in ATC Telecom Infrastructure Pvt Ltd (ATC-TIPL), with an estimated enterprise value of $1.5 to $1.75 billion.

However, the prolonged duration of the dispute allows Brookfield to reenter the negotiations with a better offer.

In 2019 and 2020, Brookfield has already invested $3.66 billion to purchase Reliance Jio’s tower asset. peak Over 135,000 communication towers, collectively known as DigiTel, serve as the foundation for Reliance Jio’s telecom operations. These towers are positioned to provide 4G coverage throughout India. Since the towers are mostly connected by fibre backhaul, they are in a competitive position to benefit from the introduction of 5G and other future technologies in both remote rural areas and densely populated urban areas. Under a 30-year contract, Reliance Jio is the tower portfolio’s anchor tenant, giving the tower company a reliable stream of income.

For a share in ATC’s India division, I Squared has been in competition with US infrastructure fund Stonepeak Partners and Canadian firm Brookfield; however, following their initial rounds of talks, the latter two international investors lost interest.

ATC had initially intended to sell off 50% to 100% of its operations in India, and it had given Citi the go-ahead to assist with the sell-off. However, a co-control model did not sit well with potential buyers, thus ATC was forced to change its strategy and consent to give up primary ownership.

ATC had previously notified the SEC in February 2023 that, in light of the difficult economic climate in the nation, it was considering strategic options, such as selling an equity holding to one or more private investors in its India unit. This came after loss-making Vi declared in the beginning of 2023 that it would not be making its contractual obligations to pay ATC in full. Citi was chosen by the tower business to oversee the sale process, while Deutsche Bank is providing I Squared with advice.

According to industry sources, ATC first demanded an EV of between $3.5 and $4 billion for its India unit, valuing its portfolio of 76,402 India towers at between $40,000 and $50,000 each.

The $15 billion Infrastructure Fund III, which it closed last year, is currently being used by I Squared.

For feedback and suggestions, write to us at [e-mail]