Brookfield has acquired 100% of the Indian unit of American Tower Corp (ATC) in a $2.5-billion (about Rs 21,000 crore) all-cash deal that is expected to close in the second half of 2024.
The Canadian multinational trumped infrastructure investment group I Squared Capital.
Brookfield will become India’s largest tower company, with a 253,000-strong portfolio, after closure of the ATC India acquisition, which includes around 78,000 sites. India’s top telecom tower company at present, Indus, had a bit over 200,000 towers in the quarter ending September 2023.
ET reported in March last year on Brookfield’s interest in ATC India. In its April 27 edition, ET said Brookfield was exploring a full buyout of the unit.
The acquisition after months of negotiations marks the Boston-based independent tower company’s exit from India. ATC had informed the US Securities and Exchange Commission in February 2023 that it was exploring strategic alternatives, including the sale of an equity stake in its India operations, amid a challenging business environment.
Reducing Debt
Earlier that year, loss-making Vodafone Idea (Vi), ATC’s biggest India client, said it won’t resume full contractual payments of what it owed the tower firm.
“ATC has signed a definitive agreement with Data Infrastructure Trust (DIT), an infrastructure investment trust sponsored by an affiliate of Brookfield Asset Management, pursuant to which DIT will acquire 100% of the equity interests in ATC’s operations in India,” ATC said in a statement on Friday.
Proceeds from the transaction are expected to be used to repay ATC’s existing debt. Total cash proceeds include an enterprise value on the ATC India operations of roughly $2 billion (Rs 16,500 crore), as well as a ticking fee that accrues from October 1, 2023, to the date of closing of the deal.
“Proceeds associated with the enterprise value assume the repayment of existing intercompany debt and the repayment, or assumption, of the existing India term loans, by DIT,” the tower company said.
ATC said it would retain the full economic benefit associated with the optionally convertible debentures (OCD) issued to it by Vi, and would be entitled to receive future payments relating to existing ATC India receivables.
Last year, Vi allotted OCDs worth Rs 1,600 crore to ATC India against its dues. Vi is still reckoned to owe ATC India around Rs 2,000 crore.
Brookfield said it looks forward to expanding and enhancing its existing telecom towers portfolio in India, which will enable a broader array of solutions for its customers and partners.
“Through strategic acquisitions like ATC India, we remain deeply committed to empowering digital connectivity and transforming the telecom infrastructure landscape across the region,” said Arpit Agrawal, managing director, head of infrastructure, India & Middle East, Brookfield.
Brookfield Businesses
This will be Brookfield’s third acquisition in the Indian telecom infrastructure space. At present, DIT houses Brookfield’s telecom tower businesses in India through Summit Digitel and Crest Digitel. Brookfield’s current portfolio is around 175,000 towers in India, acquired four years ago from Reliance Industrial Investments and Holdings Ltd, which is part of Mukesh Ambani-led Reliance Industries Ltd.
In India, Brookfield has around $25 billion in assets under management across infrastructure, real estate, renewable power & transition and private equity.
Citi was the lead financial advisor for the deal, while CDX Advisors is serving as financial advisor to ATC. Talwar Thakore & Associates (TT&A) is serving as principal legal advisor to the US tower firm.
“Brookfield’s buyout of ATC India will drive further consolidation in the tower sector,” said Rohan Dhamija, director head (India & Middle East), Analysys Mason. “It will rationalise and optimise competition in the tower industry, as two tower companies serving in a three-operator space is the most optimal competitive environment in any telecom market.”
Brookfield’s towers are strategically located for pan-India 4G and 5G coverage and are largely connected by fibre backhaul, which provides a unique platform to capitalise on the rollout of 5G and future technologies in both dense urban and remote rural areas.
Reliance Jio is an anchor tenant of the tower portfolio, under a 30-year agreement, providing a secure source of revenues.
ET was first to report in its August 23 edition that ATC and I Squared Capital had entered into a 60-day exclusivity agreement to finalise terms to potentially buy around 65% in ATC India at an enterprise value of $1.5-1.75 billion. But the matter had been dragging for months, and gave Brookfield room to reenter negotiations.
Discovery of India
Previously, ATC bet big on the India market opportunity, beefing up its tower portfolio aggressively through acquisitions. In 2015, it initially acquired around 51% in erstwhile Viom Networks from Tata Teleservices and Srei Infrastructure Finance for Rs 7,635 crore. After becoming a majority shareholder in Viom, it merged its Indian businesses. Next, ATC increased its stake to 63% in the merged entity, and renamed it ATC Telecom Infrastructure Pvt Ltd (ATC India).
Eventually, ATC took 100% ownership in its Indian unit and became the third largest tower infrastructure services provider in the country, behind Indus Towers and Brookfield-owned Summit Digitel. But continuing financial challenges at its top India customer, Vi, prompted it to start exploring a complete exit.
I Squared had been competing with Brookfield and US infrastructure fund Stonepeak for the stake in ATC’s India unit.
Industry insiders say ATC was originally demanding $3.5-4 billion enterprise value for its India unit, based on a per-tower valuation of $40,000-50,000. But lawyers, consultants and bankers aware of the deal negotiations over the past year said the premium valuations demanded by ATC were a sticky point. Bidders, including I Squared, had rejected the premium valuation ask amid concerns around the sustainability of tenancy revenue inflows in future, especially due to the continuing financial struggles of Vi.
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