Brookfield (BIP) To Acquire Indian Telecom Tower Company
Zacks Investment Research | Dec 17, 2019 09:09PM ET
Brookfield Infrastructure Partners L.P. (NYSE:BIP) along with its institutional partners recently signed a binding agreement to acquire 100% stake in a telecom tower company in India from Reliance Industrial Investments and Holdings Limited (“RIIHL”). The completion of the transaction is subject to regulatory approvals. RIIHL is a wholly-owned subsidiary of Reliance Industries Limited (“RIL”).
Benefits of the Acquisition
The deal is valued at $3.7 billion, of which the firm has made a commitment of $375 million. The remaining amount will come from its institutional partners. The firms’ Data Infrastructure segment offers services and critical infrastructure to global communication companies. RIIHL telecom tower company comprises 130,000 communication towers, which are located in throughout India for 4G coverage. The towers provide a platform to capitalize on 5G rollout and upcoming technologies. Brookfield Infrastructure is expected to generate significant revenues from RIIHL post completion of the deal. Also, Reliance Jio is an anchor tenant of the tower portfolio under a 30-year Master Services Agreement. It is also expected to provide a secure source of revenues for the new owner of the telecom tower company.
We believe that investing in India’s high-growth data industry is an appropriate decision by Brookfield Infrastructure. It is in line with the partnership’s idea of investing in high-quality telecom business. Through a tower build-out program, the partnership is expected to increase tower portfolio to 175,000. The company can also rent its towers to other telecom service providers in India and generate more revenues.
Experience in Indian Market
This is not the first time that the partnership is investing in the Indian market. In March 2019, Brookfield Infrastructure invested $2 billion to buy East West Pipeline Ltd from Reliance Industries.
Long-Term Plans
The firm’s Funds From Operations (FFO) from data infrastructure segment amounted to $94 million in the first nine months of 2019, up 65% on a year-over-year basis. The upside can be attributed to contribution from recent investments that expanded its global presence. Notably, Brookfield Infrastructure targets Europe, North & South America and Asia Pacific for its Data infrastructure services.
The recent acquisition is expected to support the partnership’s plans to execute a margin improvement and commercialise 5G services in the near future.
Price Performance
In the past 12 months, units of Brookfield Infrastructure have surged 46.8% compared with the Original post
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