The year 2023 witnessed significant financial activity in the telecom space. A notable development was the government emerging as the single largest shareholder in Vodafone Idea Limited (Vi), alongside the establishment of operational synergy between Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL).
Among private telcos, Bharti Airtel and Reliance Jio kick-started the year with strong financial performances, which continued throughout the year while Vi witnessed a continued trend of widening net losses. The year also witnessed substantial fundraising activities by telcos, digital infrastructure companies and other stakeholders, along with significant mergers and acquisitions (M&As) and Widow.
tele.net takes a look at the key financing deals and activities in the Indian telecom sector during 2023…
Mergers, acquisitions, and stake sales
Government becomes single largest shareholder in Vi
Following approvals from the Ministry of Finance and the Securities and Exchange Board of India (SEBI) in 2022, Vi’s board finally cleared the allotment of 33.44 per cent shares to the government during 2023. In a filing with the Bombay Stock Exchange (BSE), Vi informed that the government will become the single largest shareholder in Vi following the conversion of the net present value of interest on deferred spectrum payments and adjusted gross revenue -related dues amounting to Rs 161.33 billion. Vi’s board approved the allotment of 16,133,184,899 equity shares with a face value of Rs 10 each at an issue price of Rs 10 per share, totalling Rs 161,331,848,990, to the Department of Investment and Public Asset Management, Government of India.
BSNL and MTNL establish operational synergies
During the year, the government initiated the process of delisting MTNL in order to pave the way for its merger with BSNL. The proposed plan includes the merger of MTNL’s operational business, including the wireline, wireless and enterprise segments, with that of BSNL. In August 31, 2023, MTNL and BSNL signed an MoU to leverage their operational synergies. As per a regulatory filing, BSNL took over mobile service operations from MTNL.
Bharti Telecom increases stake in Airtel to 39.59 per cent
In another key move, Bharti Telecom Limited increased its stake in Bharti Airtel to 39.59 per cent by acquiring an additional 1.35 per cent stake from another promoter group entity, Indian Continent Investment Limited (ICIL), through a Rs 83.01 billion block deal. With this, ICIL’s stake in Airtel reduced to 4.56 per cent.
Warburg Pincus sells 0.32 per cent stake in Airtel
While Bharti Telecom increased its stake in Airtel, Warburg Pincus sold off its 0.32 per cent stake in Airtel for Rs 16.49 billion through an open market transaction. According to the block deal data on the BSE, Lion Meadow Investment Limited, an affiliate of Warburg Pincus, offloaded 19,000,000 shares in Airtel. The shares were sold at an average price of Rs 868 per share, taking the aggregate transaction size to Rs 16.49 billion.
Airtel and Vi sell stakes in Wi-Fi JV FireFly to Manipura Digital Infrastructure OPCO Pte. Limited
Airtel and Vi also signed a deal to sell their respective stakes in their Wi-Fi joint venture (JV), FireFly Networks, to Singapore-based Manipura Digital Infrastructure OPCO Pte. Limited for a combined value of Rs 121 million. Both Airtel and Vi would receive Rs 60.5 million each, according to their respective stock exchange filings. With the deal, Airtel and Vi will fully exit the venture that was started in 2014 but will continue to be Firefly’s customers.
Airtel concludes merger of Nettle Infrastructure Investments Limited and Telesonic Networks Limited
During 2023, Airtel concluded the merger of wholly owned subsidiaries Nettle Infrastructure Investments Limited and Telesonic Networks Limited. The amalgamation, effective from February 1, 2023, was executed after the telco received the requisite approvals from the National Company Law Tribunal, Chandigarh Bench, on January 25, 2023. Consequently, both subsidiaries were dissolved and amalgamated with Airtel, resulting in the transfer of all assets, liabilities, contracts, deeds, bonds and other instruments of Nettle and Telesonic to Airtel.
Airtel increases stakes in Indus Towers Limited and other companies
Further, Airtel increased its stakes in several companies. First, it increased its direct stake in Indus Towers Limited by acquiring 23.01 per cent shares held by its completely owned subsidiary, Nettle Infrastructure Limited. Following this transaction, Airtel’s stake in Indus Towers Limited reached 47.95 per cent.
To increase its participation in the renewable energy domain, Airtel entered into an agreement to acquire 12.07 per cent stake (283,400 equity shares) in Egan Solar Private Limited. The acquisition aims to fulfil the regulatory requirements for captive power consumption under electricity laws. Airtel also acquired an additional 20.6 per cent stake in Lavelle Networks, a Bengaluru-based software-defined wide area network start-up. With this, the telco’s total ownership in the company has increased to 45.6 per cent.
Jio Platforms’ subsidiary Radisys completes acquisition of Mimosa Networks
Jio Platforms acquired US-based Mimosa Networks, Inc. for $60 million via its wholly owned subsidiary Radisys Corporation. Mimosa will now operate as a wholly owned subsidiary of Radisys. With this acquisition, Jio Platforms will be able to improve its 5G and broadband services by acquiring Mimosa’s point-to-point and point-to-multi point products.
Tata Group undertakes key acquisitions
The Tata Group made significant acquisitions during the year. Tata Communications announced its plan to acquire Kaleyra, Inc. for a value of $100 million. The transaction was approved by the boards of directors of both Tata Communications and Kaleyra. Following the closing of the transaction in six to nine months, Kaleyra, Inc. will become a subsidiary of Tata Communications Limited. In another key move, the Tata Group signed a binding share purchase agreement with SMS InfoComm (Singapore) Pte. Limited and Wistron Hong Kong Limited to acquire 100 per cent equity stake in Wistron Infocomm Manufacturing (India). It will enable the Tata Group to officially join the Apple supply chain as an iPhone assembler. The deal is worth a total $750 million, inclusive of a $550 million intercorporate loan extended by the parent to Wistron India.
Fundraising and investment activity
Airtel allots equity shares to FCCB holders
During 2023, Airtel’s committee of directors approved the allotment of 1.42 million fully paid-up equity shares at a conversion price of Rs 518 per equity share to certain foreign currency convertible bond (FCCB) holders. This followed the receipt of a notice for the conversion of FCCBs with a principal value of $10,188,000 from the FCCB holders. As per a regulatory filing, this is in reference to the $1,000 million of 1.5 per cent convertible bonds due in 2025, issued by the company. These bonds are convertible into fully paid-up equity shares of Rs 5 each at any time between February 27, 2020 and February 7, 2025, at the discretion of the FCCB holders.
RIL and Jio raise funds through add-on forex loan and offshore loans
Reliance Industries Limited (RIL) and its unit Reliance Jio raised a $2 billion add-on foreign currency loan at the most competitive rates. Further, Jio raised up to $2 billion in offshore loans to fund the purchase of 5G network equipment from Ericsson. BNP Paribas is the lead arranger and will provide $1.9 billion-$2 billion over a nine-month period. The funding is through a discounted process.
Vi secures loan worth Rs 20 billion from HDFC Bank
Vi secured a loan worth Rs 20 billion from HDFC Bank. The funding will help the operator meet its past overdue licence fee and 5G spectrum payment commitments. The funds were disbursed in mid-September 2023, just ahead of the repayment deadlines for some accumulated loans and statutory payment commitments. The loan tenor is two years.
MTNL undertakes fundraising through 10-year government-guaranteed bonds
Throughout 2023, MTNL raised funds through 10-year government-guaranteed bonds. In February 2023, MTNL raised Rs 16.18 billion at a 7.78 per cent semi-annual coupon. In July 2023, it raised Rs 24.8 billion through government-guaranteed bonds at a semi-annual coupon of 7.59 per cent. Further, in August 2023, it raised Rs 10.55 billion through 10-year government-guaranteed bonds with a semi-annual coupon of 7.61 per cent. Later, it set a semi-annual coupon of 7.8 per cent on its government-guaranteed bonds maturing in 10 years. The telco also accepted bids worth Rs 25.7 billion for the issue.
STL’s board approves fundraising and demerger of global services business
Apart from operators, various other stakeholders also participated in fundraising activity. For instance, the board of Sterlite Technologies Limited (STL) approved the raising of funds up to Rs 10 billion. The fundraising can be executed by issuing equity shares, any financial instruments and/or security convertible into equity shares, or a combination of such securities by way of public and/or private offerings, qualified institutional placements and/or preferential allotments and/or rights offerings for an aggregate consideration of up to Rs 10 billion.
In addition, the company’s board of directors approved the demerger of the global services business into a separate legal entity, on a going concern basis.
Tata Communications to raise Rs 17,500 million via NCDs
Tata Communications also announced plans to issue non-convertible debentures (NCDs) to raise Rs 17,500 million. The NCDs will mature three years from the deemed date of allotment, that is, August 29, 2023. As per a regulatory filing, the NCDs will be issued on a private placement basis to eligible investors. A total of 175,000 NCDs with a face value of Rs 100,000 each will be issued by the company, taking the total to Rs 17,500 million. Additionally, the issue is subject to fixed rate coupon basis bidding at the National Stock Exchange of India’s electronic book provider platform, with an annual interest payment schedule.
AdaniConneX seals largest data centre financing deal in India
In the data centre space, AdaniConneX signed the largest data centre financing deal in India by entering into a financing framework and raising $213 million for its data centre asset portfolio. The tied-up facility will finance two data centres with an aggregate capacity of 67 MW, which includes the “Chennai 1” campus with a 17 MW Phase I and the 50 MW Noida campus. ING Bank N.V., Mizuhi Bank Limited, MUFG Bank Limited, Natixis, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation had committed to the facility.
Kotak Investment Advisors raises $590 million under its India-dedicated Kotak Data Centre Fund
In a notable development in the data centre space, Kotak Investment Advisors secured $590 million (about Rs 48.85 billion) in the first close of its India-dedicated Kotak Data Centre Fund, based in Gujarat’s GIFT City. In total, Kotak Investment Advisors plans to raise $800 million under the Kotak Data Centre Fund. The funds will be deployed for creating and building data centre capacity across the country, marking the first India-focused fund to partner with data centre operators to capitalise on the fast growing digital infrastructure opportunity.
Further, the Kotak Data Centre Fund announced an investment of Rs 6 billion in Sify Infinit Spaces Limited (SISL), a wholly owned subsidiary of Sify Technologies Limited. This transaction brings KotakAlt managed funds’ total equity commitment to SISL to Rs 16 billion, of which Rs 10 billion has been invested.
Key developments in the digital infrastructure space
ATC plans stake sale in India operations
The most notable financial development in the digital infrastructure space was the American Tower Corporation’s (ATC) decision to sell stakes in its India operations at an enterprise valuation of up to $2.2 billion by the end of December 2023. While the transaction was not completed by the specified timeline, US-based I Squared Capital and Brookfield were reportedly the strongest contenders for buying the telecom tower company.
BCI acquires additional 4.8 per cent stake in Brookfield’s tower InvIT
Further, British Columbia Investment (BCI) acquired an additional 4.8 per cent stake in Brookfield’s tower infrastructure investment trust (InvIT), Data Infrastructure Trust. The investment was made through a block deal worth around Rs 20 billion. This was BCI’s second investment in the tower InvIT. It had previously acquired a 2 per cent stake in the tower InvIT, when Brookfield sold its share through an offer for sale raising Rs 23.31 billion, the first transaction of its kind by an InvIT in India.
Vi issues 12,000 OCDs to ATC
Another key development was the allotment of 12,000 unsecured, unrated and unlisted optionally convertible debentures (OCDs) by Vi to ATC’s India arm, ATC Telecom Infrastructure Private Limited. As per Vi, the balance 4,000 OCDs will be allotted upon receipt of the application form and subscription money, and due intimation of the same will be filed as necessary. The Capital Raising Committee of Vi’s board of directors approved the preferential issue of OCDs to ATC, resulting in a fundraise of Rs 16 billion. After issuing 16,000 OCDs to ATC, the company will hold a 3.18 per cent stake in the telco, assuming the full conversion of the OCDs issued.
Later, Vi disclosed in an exchange filing that it has extended the redemption period for 8,000 OCDs, out of the 16,000 allotted to ATC’s India arm, ATC Telecom Infrastructure Private Limited, from the initial six months to a new time frame of 18 months from the date of allotment.
STL divests multiple businesses to Skyvera
STL divested its network software, data and analytics, business software – operations support system and business support systems, and services business units – to Skyvera against a monetary consideration of $15 million. To this end, STL signed an agreement to sell its telecom product software business through a business transfer agreement, by way of slump sale, as a going concern to Skyvera through its Indian subsidiary. The deal aligns with the company’s strategy of making calibrated exits from sub-scale businesses and realigning its portfolio to focus on growth opportunities while optimising the capital structure.
iBus acquires Sheltera to strengthen foothold in small cell and optical fibre domains
iBus Networks acquired Sheltera Construction International Limited to improve its position in the small cell and optical fibre domains. Through this acquisition, iBus will have access to Sheltera’s portfolio of more than 700 small cells and over 500 km of optical fibre networks spread across six states in India. However, the financial details of the acquisition were not disclosed.
IPOs
Airtel initiates IPO process for its subsidiary Bharti Hexacom
Airtel initiated the preliminary stages of the initial public offering (IPO) for its subsidiary Bharti Hexacom. Airtel owns a 70 per cent stake in the company, while the government owns the remaining 30 per cent through Telecommunications Consultants India Limited. Bharti Hexacom’s valuation is estimated at Rs 300 billion, and the government expects to generate around Rs 100 billion from a potential sale of its 30 per cent stake in Bharti Hexacom.
Outlook for 2024
The year 2024 has started with a series of financial developments. The most notable among these is the signing of a definitive agreement by Brookfield Asset Management-sponsored Data Infrastructure Trust to acquire a 100 per cent equity stake in ATC India. The transaction, which reflects the completion of the previously announced strategic review of ATC’s operations in India, is subject to customary closing conditions, including government and regulatory approvals, and is expected to close in the second half of 2024.
Further, Bharti Airtel Services, a wholly owned subsidiary of Bharti Airtel, has entered into an agreement for the acquisition of 4.94 million equity shares, representing 97.1 per cent stake, in Beetel Teletech Limited, another Bharti Group company. Furthermore, Bharti Hexacom has filed its draft red herring prospectus with SEBI for an IPO. The IPO will be an offer for sale of up to 100 million equity shares by its existing shareholders.
As these and more developments unfold throughout the year, the financial landscape is expected to be action-packed, especially as stakeholders continue to invest in the ever-expanding 5G ecosystem. Among telcos, Airtel and Jio are likely to maintain a strong foothold in terms of scaling up investments while Vi is expected to focus on its fundraising plans and strengthening its financial position.
Kuhu Singh Abbhi
