Airtel, Vodafone-Idea fibre JV A Business Opportunity For PE Funds

Bharti Airtel’s announcement that it is partnering with Vodafone-Idea offers a business opportunity to private equity funds keen on investing the optical fibre space for leasing the assets and earning rentals in return. The optical fibre synergies will be on the lines of the tower business, where the two companies will hive off the fibre assets to a third company, which in turn will lease them out.

Analysts believe that it is a balance sheet-light approach for the companies which are under financial stress at the moment.

In the current environment the companies would want to demerge their fibre assets and give it to a third company, subsequently making their balance sheets lighter. As far as the PE funds are concerned it is an annuity business for them.

Bharti Airtel Chairman Sunil Bharti Mittal on Tuesday said that his company was looking at an optical fibre joint venture with Vodafone-Idea to take on Reliance Jio.

“We have made an invitation. We did that in towers — if you remember, Indus Towers was created. And on the same lines, we have asked Vodafone-Idea to come and join the fibre company,” Mittal told reporters on the sidelines of the Mobile World Congress in Barcelona (Spain).

Mittal said the JV would be on the lines of its jointly-owned tower company, Indus Towers.

On January 7, 2008, Vodafone Essar, subsidiary of Vodafone Group, Bharti Infratel and Idea Cellular announced the formation of an independent tower company, Indus Towers Limited, to provide passive infrastructure services in India to all operators on a non-discriminatory basis.

The three companies merged their existing passive infrastructure assets in 16 circles in India. Vodafone and Bharti own approximately 42 per cent each, Idea Cellular holds 11.15 per cent and the remaining 4.85 per cent is held by private equity firm Providence.

Indus Towers is independently managed, and offers services to all telecom operators and other wireless services providers such as broadcasters and broadband services providers.

The idea behind setting up Indus Towers was to enable telecom operators to reduce operating costs through economies of scale.

In April 2018, Bharti Infratel Ltd, the tower arm of Bharti Airtel and Indus Towers agreed to merge their businesses to create the world’s largest tower company after China.―India Finance News