America Tower inks $2.5 billion India exit deal

Talk of a sale of the business has been ongoing for the past year or more, American Tower having been fairly open about its search for a buyer – or its strategic review of the unit, at least – and endless speculation over the outcome having regularly appeared in the Indian press. But while the deal itself doesn't come as a surprise, the price tag is perhaps lower than we might have expected; less than a year ago there was talk of American Tower looking for $4 billion for the Indian unit, although admittedly that always looked ambitious in the current climate.

Under the terms of the deal American Tower will gain total cash proceeds of "up to approximately" 210 billion rupees, or $2.5 billion at current exchange rates. The final total will be made up of around $2 billion in enterprise value plus a ticking fee – essentially a sum that accrues during the sale process, normally with a view to speeding it up – which started on 1 October and will continue running until the closing date, set for the second half of next year.

Presuming all goes well, American Tower's Indian asset will pass to Data Infrastructure Trust, an affiliate of Brookfield, which already has tower operations in India. The firm has an extensive presence, including a portfolio of around 175,000 towers held by its Summit Digitel business.

India is a pretty big market for American Tower. It has around 78,300 towers there, which will be added to Brookfield's portfolio, and had guided for the market to contribute around 10% of its property revenues this year. But it is not without its challenges.

Arguably, Vodafone Idea is the biggest thorn in American Tower's side in India. It is the firm's largest customer, but its extensive financial problems mean the towers provided has repeatedly cautioned of the likelihood of it failing to make payments.

On a broader scale, towers companies in general are struggling as a result of a slowdown in spending from telecoms operators and India is no exception to that. Market consolidation has also taken its toll on passive infrastructure firms.

Thus an exit for American Tower via a sale to a company that already has an Indian footprint at what looks like a fairly advantageous price for the buyer makes a lot of sense.

The move will leave American Tower free to concentrate on its core business in the US and various other global markets. Not that it had a lot to say on the matter.

"Proceeds from the transaction are expected to be used to repay American Tower's existing indebtedness," was the company's only real comment in its sale announcement.

That focus on deleveraging is a key tenet of most passive infrastructure providers' strategies at present too.