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(Alliance News) - Vodafone Group PLC said Tuesday it has agreed with Bharti Airtel Ltd to forge ahead with the merger of Indus Towers Ltd and Bharti Infratel Ltd.
Shares in the FTSE 100-listed telecoms firm were down 2.9% in London on Tuesday morning at 108.20 pence each.
The merger - first agreed in April 2018 - will see Vodafone merge its Indian mobile tower joint venture with a local rival to create the world's second largest tower mobile company.
The company said joint venture Indus Towers will be merged into Bharti Infratel to create a combined company that will be called Indus Towers Ltd and will continue to be listed on the Indian stock exchanges.
Bharti Infratel is owned by Indian telecoms company Bharti Airtel and Vodafone Idea - which holds an 11.15% stake in Indus Towers - and is operated by Vodafone alongside Bharti Airtel.
Vodafone currently owns a 42% stake in Indus Towers, with the remaining stake owned by Bharti Infratel, Vodafone Idea and Providence Equity Partners LLC.
Vodafone expects to issue 760 million new shares for its 42% stake in Indus Towers.
At current market values, Vodafone's stake is valued at EUR1.7 billion, and Vodafone Idea will net EUR464 million from the deal.
The new combined company is expected to be worth USD14.6 billion and will have annual revenue of around GBP3.8 billion. The new company will be jointly controlled by Vodafone and Bharti Airtel under a new shareholders agreement.
On Tuesday, Vodafone Idea also agreed to a "security package" should it be "unable to satisfy certain payment obligations under its master services agreement". This includes a EUR276 million cash prepayment, and a primary pledge of shares by Vodafone with a value of EUR464 million.
In January of this year, Fitch Ratings said a court ruling in India could leave Vodafone's Indian business facing "severe" liquidity problems.
The Indian Supreme Court rejected an appeal by Vodafone Idea, against a decision to make it pay USD4 billion in fees.
Vodafone Idea and other firms in the beleaguered Indian telecom sector were ordered in November 2019 to pay a combined USD13 billion in past spectrum and licence fees.
By Paul McGowan; paulmcgowan@alliancenews.com
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