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Vodafone India India's profit before taxes dives 39 per cent

15 November 2017

Vodafone India and Idea Cellular are selling their standalone telecom tower businesses to ATC Telecom Infrastructure Pvt.

"In the long term, we have a positive view on Idea and the deal could be viewed as a positive move with the 40 billion rupee-transaction value aiding Idea in cutting down its balance sheet debt", said Gaurang Shah, Head Investment Strategist at Geojit Financial Services.

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The standalone tower businesses of Vodafone India and Idea Cellular are pan-Indian passive telecom infrastructure businesses, comprising a combined portfolio of approximately 20,000 towers with a combined tenancy ratio of 1.65x as of 30 June 2017. "The parties will work together to further the expansion of high-speed mobile networks in India", it added. The deal is expected to close in 2018. The tribunal headed by Sir Franklin Berman was constituted in June 2016 after Vodafone challenged India using a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone's United States dollars 11-billion acquisition of 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.Vodafone challenged the demand of Rs 7,990 crore in capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT). Upon announcing their merger in March this year, both operators also stated that they would be looking to sell their standalone tower units so as to strengthen the combined entity, which will surpass Bharti Airtel to become the Indian market leader.

Vodafone India on Tuesday reported a steep 39.2% plunge in pre-tax profit at Rs 4,075 crore for the six months to September, joining its peers who have cumulatively lost Rs 4,087 crore in the second quarter alone, exposing the deep scars in the once-sunshine segment.

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The entry of Reliance Jio in the telecom sector has led to a wave of consolidation as the financials and margins of existing players have come under huge pressure.

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