Indus Towers Limited · NSE:INDUSTOWER
Indus Towers — Bharti Infratel — Merger or Acquisition (December 2018)
25 slides from Indus Towers's merger presentation, December 2018
Slide 1: Proposed Merger with Indus Towers
Proposed Merger with Indus Towers Dec 2018
Slide 2: Disclaimer
Disclaimer By attending the meeting where this presentation is made, or by reading the presentation materials, you agree to be bound by the following limitations: The information in this presentation has been prepared by Bharti Infratel Limited (the “Company”) for use in presentations by the Company
Slide 3: Merger with Indus Towers
Merger with Indus Towers Merged & Entity Via All Stock Transaction Or Via Part Stock Part Cash Transaction Note: 1. The merged entity will fully own the respective businesses of Bharti Infratel and Indus Towers, will change its name to Indus Towers Limited and will continue to be listed on the India
Slide 4: Merger with Indus Towers
Merger with Indus Towers Issues shares to Vodafone Group for 42% of Indus Issues shares to Vodafone-Idea for 11.15% of All Stock Indus Transaction Issues shares to Providence (PEP) for 4.85% of Indus Or Issues shares to Vodafone Group for 42% of Indus Part Stock Part Issues shares to PEP for 1.5% of
Slide 5: Merged Entity: Operational and Financial Snapshot
Merged Entity: Operational and Financial Snapshot Towers, Co-locations and Revenue, EBITDA and Sharing Factor (1) Profit After Tax (2) Average 2.04x Sharing Factor 1) Data as of 30 September 2018 2) Estimates based on LTM data ending 30 September 2018, assuming merger was effective on 1 October 2017
Slide 6: Rationale for the Transaction
Rationale for the Transaction Attractive valuation for existing Infratel shareholders, Indus @5.2% discount on relative valuations for share election and 10% discount for cash election Enhancement in Return on Equity (ROE) due to improvement in capital structure Up to 0.6x Net Debt/EBITDA vs. Net Ca
Slide 7: Rationale for the Transaction (contd.)
Rationale for the Transaction (contd.) Simplified shareholding structure with no single operator holding majority in the merged entity Shares in a listed entity provides exit opportunity to shareholder operators of Indus Operational synergies in the form of capex/opex envisioned Creating the largest
Slide 8: Attractive Valuation for Existing Infratel Shareholders
Attractive Valuation for Existing Infratel Shareholders Construct for Issuance of Shares: Discount of 5.2% on relative valuations The merger ratio as at the date of agreement is 1,565 shares in Infratel for every one Indus share. The merger ratio has been based on agreed relative Enterprise Valu
Slide 9: Enhancement in Return on Equity due to Improvement in Capital Structure
Enhancement in Return on Equity due to Improvement in Capital Structure ROE improves by 265 bps to 18.4% post transaction driven by improvement in capital structure Notes: • Infratel Consol refers to pre-merger entity with 42% ownership in Indus • Data for Infratel Consol is actual for quarter endin
Slide 10: Up to 0.6x Net Debt/EBITDA vs. Net Cash position currently
Up to 0.6x Net Debt/EBITDA vs. Net Cash position currently Post Transaction Transaction to improve capital structure by bringing higher leverage to the merged entity Notes: • Infratel Consol refers to pre-merger entity with 42% ownership in Indus • Data for Infratel Consol are actuals based on closi
Slide 11: Accretion in Earnings Per Share…
Accretion in Earnings Per Share… Post Transaction EPS accretive in all scenarios despite dilution driven by lower effective tax rate Notes: • Infratel Consol refers to pre-merger entity with 42% ownership in Indus • Data for Infratel Consol is actual for the financial year ending 31 March 2018 • Dat
Slide 12: …and correspondingly possible increase in Dividend Per Share
…and correspondingly possible increase in Dividend Per Share Payouts made by the merged entity will be more tax efficient as currently there is a dual incidence of Dividend Distribution Tax (first paid by Indus and subsequently by Infratel on declaration of dividend to its shareholders) which will
Slide 13: Removal of Holdco Discount
Removal of Holdco Discount Removal of holdco discount for Indus could theoretically uplift Infratel equity value by ~5-10% Notes: Data using EV/EBITDA LTM Sep’18 multiple of 7.22x for Bharti Infratel 13 of 25
Slide 14: Simplified Shareholding Structure
Simplified Shareholding Structure No single operator owning majority stake in the merged entity Provides global investors direct access to the ~124k towers of Indus Shares in listed entity provide exit opportunity to shareholder operators of Indus Single entity with one set of Board of Direc
Slide 15: Shareholding Structures
Shareholding Structures Current: Indus and Infratel Post Transaction: Merged Entity 1) Current Infratel public shareholding includes 10.34% held by Silverview Portfolio Investments Pte. Ltd. (KKR) and Canada Pension Plan Investment Board (CPPIB) 2) Bharti Airtel shareholding in the Company as on Sep
Slide 16: Capex and Opex Synergies Envisioned
Capex and Opex Synergies Envisioned Likelihood of saving by way of lower administrative cost, Opex Related savings on account of common expenses, tower operating Synergies center costs etc. The head office cost for the merged entity was in the vicinity of Rs.3-4bn during FY 2017-18. Volume dis
Slide 17: Creating the largest in-country towerco outside China
Creating the largest in-country towerco outside China Key Indian Tower Companies(1) Key Global Listed Tower Companies(1) Sharing Factor 2.04(2) 1.5 NA 2.04(2) 2.2 1.59 1.63 1.73 2000 1800 1879 Towers (‘000s) For the purpose of this chart, Indus refers to the merged entity and includes Bharti Infrate
Slide 18: Details of Merger and Valuation Construct
Details of Merger and Valuation Construct Vodafone Group shall swap its 42% in Indus against shares in combined entity as per valuation construct Providence or PEP shall swap its 1.5% in Indus against shares in combined entity on same basis as Vodafone Group Basic Construct Vodafone-Idea for i
Slide 19: Governance, Dividend Policy and Other Highlights
Governance, Dividend Policy and Other Highlights Joint Governance and Bharti Airtel and Vodafone Group will have equal rights in the combined company Management 11 member Board of whom: 3 will be appointed by each of Bharti Airtel and Vodafone Group Board of Directors and 1 will be appointed
Slide 20: Mitigating the renewal risk and securing future cash flows
Mitigating the renewal risk and securing future cash flows Right of first refusal from Bharti Airtel and Vodafone-Idea to continue for a period of five years for availing passive infrastructure services from the merged entity with some carve outs/exemptions and commitments. Large part of the co-
Slide 21: Merger Timelines
Merger Timelines • Merger Announcement Apr 2018 • Approval received from Competition Commission of India (CCI) Jun 2018 • No adverse objection letters received from Stock Exchanges – Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) Jul 2018 • Approval from National Company Law Tribunal
Slide 22: In Summary
Ss » 2 Bharti Infratel Limited In Summary 22 of 25
Slide 23: Strategy for the Merged Entity
Strategy for the Merged Entity Promote Nationwide Passive Infrastructure Sharing Capitalize on opportunities due to Organic Growth and Acquisition data growth, Digital India, Smart Opportunities Cities’ Initiatives of Government Increasing Revenue and Capital Achieving Cost Efficiencies Productivity
Slide 24: Investment Thesis
Investment Thesis Demonstrated Operational Largest listed Indian Insulated from Major and Financial Performance towerco with ~1.9x Closing Concerns - $-Re, Leverage, Sharing Factor Import Dependence Operator Agnostic Way to Experienced Leadership Benefit from Team Data Growth Regulatory Environment
Slide 25: Thank You
Ss » 2 Bharti Infratel Limited Thank You 25 of 25
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