Essar sells towers business to American Tower for $450 million

The diversified Indian industrial group sells 100% of its telecom towers business to American Tower in a deal that specialists say represents good value for both buyer and seller.

Indian conglomerate Essar Group has sold its telecommunications towers business to a subsidiary of Boston-based American Tower for $450 million, in the second tower deal in India year-to-date.

Essar owns 4,500 towers and the deal has been transacted at a value of $100,000 per tower, broadly in the same range as the price at which the Aircel sale to GTL Infrastructure was transacted last month. However, some specialists said Essar's towers have more attractive tenancy parameters, making this a better deal for the buyer.

The $450 million price tag comprises an equity value of $300 million with American Tower taking on the remaining $150 million through debt already on the books.

Some telecom players are monetising their tower assets to create a war-chest to fund the expansion of their mobile businesses. India's mobile network is growing fast but intense competition between players has resulted in cutthroat pricing. As a result, many telecom players are operating in the red.

Essar is expected to deploy the funds in its oil and gas and other businesses, said a source close to the transaction, who added that the Ruia-founded group has some ambitious expansion plans in the works.

Barclays Capital advised Essar on the deal which results in the Indian group exiting Essar Telecom Infrastructure completely. The deal was run as a limited auction, said a source, and Essar was open to both a partial sale or a complete exit.

Indeed, the initial information memorandum that went out to potential buyers around a year ago invited bids for a partial stake sale. Private equity firms were expected to be aggressive bidders for such a structure. However, American Tower was keen to own the entire business and Essar group decided to make a full and final exit from the towers portfolio. Essar continues to have a 33% interest in the telecom business through a minority stake in Vodafone Essar.

This is the third acquisition in India by American Tower in the past year. American Tower, the largest independent tower company in the US, earlier bought Xcel Telecom and Transcend. However, this is American Tower's largest deal and takes its total towers portfolio to around 7,000, said specialists. American Tower did not have an adviser on the deal.

The deal is still subject to approval by India's Foreign Investment Promotion Board (FIPB). It is expected to close within three months.

The telecom sector in India has been keeping investment bankers busy. Leading Indian mobile company Bharti Airtel recently announced it is seeking to acquire Kuwait-based Zain's Africa operations for $10.7 billion. Sources said Bharti's advisers, Standard Chartered and Barclays Capital, have each provided a $5 billion letter of commitment for the acquisition and are currently forming a syndicate of banks to fund the deal. 

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