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KKR, CPPIB dial in on $953m Indian telco tower deal

The pair has acquired 10.3% of Bharti Infratel, the telecom tower subsidiary of India’s largest telecom operator.

Bharti Airtel has sold a 10.3 percent stake in its telecom tower business to a consortium of funds advised by US buyout firm KKR and Canada Pension Plan Investment Board for over 61.9 billion rupees ($953 million; €884 million). 

The transaction marks KKR’s second investment in Bharti Infratel, which develops, owns and operates telecom towers and communication structures for various mobile network operators, Airtel said. KKR-managed funds had already invested in the company during 2008-2015.

“This investment by a consortium of marquee long-term investors underlines the confidence of the global investors in India’s growth story and the government’s Digital India initiative in particular,” said Sunil Bharti Mittal, chairman of Airtel. He added that the long-term investment horizon of the investors aligns well with the capital needs and business cycles of Infratel. 

The Indian company said it would use the proceeds from the sale to reduce its debt. Following the transaction, Bharti Airtel will own a 61.7 percent stake in Bharti Infratel, with the remainder owned by fund managers including Fidelity Management & Research Company and Aberdeen Asset Management. The joint stake owned by KKR and CPPIB is the second-largest share in the company after that held by parent company Airtel. 

Following the announcement, Airtel said today that it has transferred a 11.32 percent stake to a wholly-owned subsidiary called Nettle Infrastructure Investments. 

As a result, the latest ownership structure of Infratel comprises a 50.33 percent stake held by Airtel, 11.32 percent owned by Nettle, and 38.35 percent belonging to public and other shareholders, including KKR and CPPIB. 

Infratel has a consolidated portfolio of over 90,000 telecom towers, including over 38,500 of its own towers and the balance coming from its 42 percent stake in Indus Towers, the largest telecom tower company in the country. 

Two shareholders of Indus Towers, Vodafone India and Aditya Birla’s Idea Cellular, are looking at options to exit their stakes in the tower business. The companies, respectively the second- and third-largest telecom players in the market, proposed a merger earlier this month to create a bigger entity which is set to take over Airtel’s position as India’s largest player by revenue market share.

As part of the merger plan, the two companies plan to sell their standalone tower assets, as well as Idea’s 11.15 percent stake in Indus Towers. Vodafone owns a 42 percent stake in Indus Towers, for which the company is exploring exit options including a partial or a full disposal. 

Last December, Canadian fund manager Brookfield entered into a binding agreement to acquire a majority stake in Reliance Communications’ portfolio of telecom towers for 110 billion rupees.