Tata Teleservices is settling with American Tower for $320 million following its early exit from 30,000 tower leases in India after it sold its mobility business to Bharti Airtel.
The sale paves the way for the Tata group to close its agreement with Bharti Airtel which required that the conglomerate would need to clear all liabilities from earlier agreements. The telco entered a “cash free debt free” deal with Sunil Mittal-owned Bharti Airtel this year.
Tata is also selling half of its 26% holdings in the ATC Telecom Infrastructure Private Ltd to American Tower which will also buy IDFC’s 2% stake.
“We’ve been working amicably with the Tata Group for nearly a year to reach an agreement that satisfies three main objectives for us while also respecting our partner’s goals of an orderly exit from both the mobile business and from our tower joint venture,” said American Tower Corp. Chairman and CEO Jim Taiclet during an analysts’ call Tuesday.
“Those three objectives for ATC which we believe we’ve attained through this agreement, were to: first, preserve our ability to achieve American Tower’s long-term return on investment targets in India by securing economic value for Tata Teleservices leases to be terminated while at the same time retaining a portion of the run rate through new leases with other Tata Group businesses; second, to better position ATC India for growth in the post-consolidation phase of the Indian mobile market in the 2020 timeframe and beyond; and thirdly, to set the timeline to evolve the joint venture through the replacement of Tata as a partner with either increased ATC ownership, an additional partner, or some combination,” Taiclet said.
American Tower said that in Asia they expect slightly higher levels of gross new business, but their churn expectations are being raised to incorporate the impact of their settlement with Tata.
As a result, they projected an organic tenant billings decline of around 13% versus a decline of 11% they included in prior guidance.
American Tower’s third quarter earnings report Tuesday beat analysts’ expectations and their revenue topped forecasts.
Yesterday, American Tower’s stock increased by approximately 5%, but lost half of those gains today at 2:00 p.m.