STC: Indian firms close in on Saudi telecom deal

Two of India's fastest growing and largest independent tower companies have moved a step closer towards their first foreign acquisition. Manoj Tirodkar-promoted GTL Infrastructure and the Kanoria family-sponsored Quippo Telecom Infrastructure Ltd (QTIL), have been shortlisted to pick up a strategic stake in the tower assets of Saudi Telecom Company (STC), the largest listed telecom operator in West Asia. This comes when Quippo's joint venture (JV) with Tata Tele-Viom is in the process of shortlisting investment bankers for a $1.5-billion Initial Public Offer in India and just one and a half months after GTL and Reliance Communications terminated their ambitious Rs 50,000-crore merger talks.

Saudi Telecom had in July appointed Morgan Stanley Dubai to bring in a strategic partner for its 12,000-strong tower portfolio. Following the global trend, a separate JV was to be formed, where the new strategic partner where to hold between 51-60 per cent stake, with Saudi Telecom owning the residual minority share. Booz Allen & Company has also been advising Saudi on strategy. Representatives of the advisors have been frequenting India to understand the potential suitors of the towers.

Investment bankers aware of the transaction said international heavyweights like the American Tower Company, Crown Castle and a French independent tower company had also shown interest. Though the final deal value is still not clear and would finally be dependent on the quantity of stake that gets offered, sources said the enterprise value of STC's towers will be $1.4 billion.

Their towers have an average tenancy of 1.5. Their principal tenants include Zain, Mobily and Saudi Telecom.

What may help GTL in the crucial stage is its long business association in the Gulf region. Its various group companies have been present in the Gulf for the past decade in the network service business, serving telecom companies and equipment makers such as STC, Etisalat, Du Telecom, Ericsson, Atcatel Lucent and Nokia. Many felt what may eventually swing the deal in its favour is its strategic relationship with the Saudi telecom company. After its acquisition of Aircel's tower business, GTL has an indirect business relationship with the firm.