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Tower Talk: a guide to the week’s major cell site developments

12 Apr 2016

The Competition Commission of India (CCI) has approved American Tower Corp’s (ATC’s) acquisition of a majority stake in Indian tower firm Viom Networks, the Economic Times reports. The transaction will see ATC pay INR58.57 billion (USD880 million) for a 51% stake in Viom, which owns and operates around 42,200 towers across India, with a further 1,000 under construction. ATC will acquire the 18.5% stake in Viom currently held by SREI Group, along with all but 34.0% of Tata’s current 54.0% shareholding, whilst several smaller shareholders, including Macquarie-SBI Infrastructure Fund and IDFC Private Equity, will also reduce their stakes. Further, under the agreement, ATC may acquire or be required to acquire all or a portion of the remaining 49% shares. In addition to its takeover of Viom, ATC also plans to invest a further INR133 billion in India. Although further details of the planned investment were unavailable, ATC Chairman and CEO James Taiclet confirmed that the group will not be looking at any further acquisitions for at least two years, by which point it expects to have completed the integration of ATC India and Viom, and will be in a better position to assess any strategic opportunities.

US-based wireless infrastructure provider Crown Castle International has acquired Tower Development Corporation (TDC) from investment firm Berkshire Partners for approximately USD461 million, the infrastructure provider announced in a statement. TDC owns and operates 336 towers in the US and Puerto Rico with an average tenancy of approximately two tenants per tower. The takeover is expected to contribute approximately USD25 million to USD27 million to site rental gross margin in the first full year, and the acquisition was funded with the group’s available cash, including cash on hand, cash from borrowings under its revolving credit facility and cash from the sale of around 3.5 million shares of common stock. Crown Castle claims to be the US’s largest provider of shared wireless infrastructure, with a portfolio of around 40,000 towers and 17,000 small cell nodes, supported by 16,000 miles of fibre.

Staying in the US, cellular provider Sprint has agreed a sale and leaseback agreement with several bankruptcy remote entities, referred to collectively as ‘Network LeaseCo’. Under the deal, Network LeaseCo will acquire network assets consisting primarily of equipment at cell towers and worth a total of around USD3 billion, and lease them back to the cellco. The equipment will then be used as collateral to borrow approximately USD2.2 billion from external investors, including SoftBank. The USD2.2 billion of cash proceeds Sprint expects to receive from the transaction is scheduled to be repaid in staggered, unequal payments through January 2018. Sprint will consolidate Network LeaseCo, and Sprint’s consolidated financials will reflect the cash proceeds it receives as well as the underlying debt of Network LeaseCo. Further, the network assets involved in the transaction will remain on Sprint’s consolidated financial statements and will continue to be depreciated. In addition, Sprint will record interest expense incurred in connection with the debt of Network LeaseCo. Explaining the transaction, Sprint CFO Tarek Robbiati commented: ‘Sprint and SoftBank have worked together again to create a unique structure that provides Sprint with an attractive source of capital. This transaction is an important first step in addressing upcoming debt maturities and allows us to stay focused on our corporate transformation, which involves growing topline revenues and aggressively taking costs out of the business to improve operating cash flows.’

Similarly, shareholders of Russian mobile provider VimpelCom, which operates under the Beeline brand, have reportedly green-lit plans to spin off the operator’s tower infrastructure into a separate subsidiary, Telecompaper writes, citing Russian news outlet Prime. Shares in the new company, dubbed National Towers Company, will be distributed to existing shareholders.

Jersey-based investment group 3i Infrastructure has signed an agreement to acquire a 36% economic interest in Wireless Infrastructure Group (WIG), an independent communications infrastructure provider headquartered in Bellshill, Scotland, with more than 2,000 sites across the UK. The agreement will see 3i invest GBP75 million (USD105.9 million) in WIG, supporting a GBP1 billion investment plan to substantially scale up the company. The transaction is currently awaiting regulatory approval from the European Commission (EC) and is expected to be completed by the end of June 2016. Commenting on the deal, WIG CEO Scott Coates noted: ‘3i infrastructure will provide us with additional long term capital and a partner to enable us to scale up our UK infrastructure footprint and also expand our presence in Western Europe. Independent infrastructure companies like WIG provide a conduit for long term infrastructure investors to support the telecoms industry as it takes on the challenges of expanding the quality and reach of connectivity. The case for independent ownership of upstream broadband infrastructure such as masts and fibre is an increasingly compelling one. In the mobile sector, independently operated infrastructure enables better connectivity, attracts new sources of investment and promotes infrastructure competition in a consolidating telecoms market.’

Finally, African tower management firm IHS has selected Flexenclosure, a designer and manufacturer of intelligent power management systems to provide its eSite power systems to 1,000 of its towers in Abuja, Nigeria. The eSite solution is a hybrid power system for base station sites in areas where the power grid is either unreliable or unavailable, and combines battery, solar and diesel generator power sources, cutting diesel-related costs by up to 90%. Flexenclosure also notes that the eSite solution is designed to be used in a shared tower environment, where it can provide power to several mobile base stations.

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