Tata Teleservices looking to sell 49 per cent of tower business for Rs8,200 crore; SREI's Quippo may be likely buyer

Tata Teleservices, the Tata group's telecom arm, is selling a minority 49-per cent stake in Wireless Tata Telecom Infrastructure, which has 13,500 towers across the country. The entire tower business company is valued at $3.9 billion or Rs16,800 crore. Accordingly, a 49-per cent of it will be equivalent to $1.9 crore or Rs8,200 crore.

Independent tower company Quippo, promoted by SREI group, is considered to be the front runner for this acquisition. It has already made a presentation to the Tata management regarding its expertise in managing infrastructure and how it could assist them in future expansion. While the Tatas are comfortable with establishing a relationship with Quippo, the central issue is the total price paid.

If Quippo manages to clinch the deal, it would add to its existing repertoire of 5,000 wireless towers, including the recently acquired portfolio of 875 towers from Spice Communications for Rs600 crore. The company aims to have a total of 25,000 towers under its management by 2011.

Each GSM (global system for mobiles) tower is valued at Rs1 crore while a CDMA (code division multiple access) tower is worth Rs1.25 crore. GSM and CDMA are the two prevailing technologies used in mobile phones around the world. Tata Teleservices mainly operates on the CDMA platform, and is India's fifth largest mobile services provider. It had first announced its intention of hiving off its tower business into a separate company in March 2007. (See: Tata Teleservices to spin off cell tower business)

The Tata's tower business has generated a lot of interest from various firms, including foreign players and private equity funds. Thirty companies had initially shown interest in the Wireless Tata Telecom stake, with the list finally narrowing to three players - American Towers, Quippo Telecom and Gurgaon-based Independent Mobile Infrastructure. American Towers, however, has pulled out of the race.

Rrival Bharti Airtel's tower company, Bharti Infratel, which has nearly 50,000 towers, had recently divested 10-per cent stake to foreign investors for about $1 billion, giving it an enterprise value of $10-12.5 billion. (See: Global investors invest $1 billion in Bharti Infratel)

It also has a partnership with Vodafone Essar and Idea Cellular in Indus Towers, an independent tower company, which has over 70,000 sites. (See:Bharti, Idea, Vodafone Essar to form independent tower company)