DoT approved Bharti Infratel and Indus Towers merger.
Vodafone Idea can raise funds by selling stake in Indus Towers.
Shares of Vodafone Idea had jumped nearly 14%, while those of Bharti Infratel Ltd had surged as much as 10% in early deals on Monday following the government's approval to the merger Indus Towers with Bharti Infratel.
At 11am on the BSE, Bharti Infratel Ltd was flat at ₹226.20 apiece, while Vodafone Idea Ltd was down nearly 2% at ₹4.38, having earlier touched a high of ₹5.01. Bharti Airtel was down 1.7% at ₹536 apiece.
The department of telecommunications (DoT) on Friday approved the merger of two tower companies--Sunil Mittal-led Bharti Infratel Ltd and Indus Towers Ltd--allowing Vodafone Idea Ltd to raise funds by divesting its stake in the latter.
The approval follows a series of meetings between Vodafone Idea chairman Kumar Mangalam Birla and top government officials after the Supreme Court directed telecom companies to immediately pay up dues related to adjusted gross revenue (AGR).
Birla had met telecom secretary Anshu Prakash on Tuesday, and followed it up with a meeting with finance minister Nirmala Sitharaman on Wednesday, to share his concerns over the possibility of DoT invoking bank guarantees of the telecom operator.
The combination of Bharti Infratel and Indus Towers will create a pan-India tower company with over 163,000 towers, operating across all 22 telecom service areas. The combined entity will be the largest tower company in the world outside China.
Under the proposed merger, Bharti Airtel, which currently owns a 53.5% stake in Bharti Infratel, will own between 33.8% and 37.2% in the merged entity, while Vodafone Plc. will hold 26.7-29.4%.
Airtel and Vodafone Plc. will have equal rights in the merged tower entity.
Indus Towers is a three-way joint venture between Bharti Infratel, Vodafone Idea and UK-based Vodafone Group. Bharti Infratel and Vodafone hold 42% stake each in Indus Towers. Vodafone Idea holds 11.15% stake in the mobile tower firm.
The combined company, which would fully own the respective businesses of Bharti Infratel and Indus Towers, would change its name to Indus Towers Ltd and will continue to be listed on Indian stock exchanges.
The timely completion of the tower deal is critical for the companies, as it would allow Bharti Airtel and Vodafone Idea offload stake and raise funds.
In April 2018, Bharti Airtel, Idea Cellular, and Vodafone Group had announced an agreement for the merger of Indus Towers and Bharti Infratel.
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