"Second quarter earnings were bad and the tower deal valuation is not great", said Naveen Kulkarni, co-head of research at Phillipcapital India Pvt Ltd.in Mumbai on phone.
Idea and Vodafone Group's India unit are on track to merge operations in a deal valued at $23 billion Vodafone India has also agreed to sell its standalone tower business to ATC Telecom for an enterprise value of 38.50 billion rupees.
Canada's Brookfield, which called off talks to buy a stake in struggling Indian network operator Reliance Communications masts arm, has said it is open to acquiring the business under revised terms, while it looks at other potential opportunities in the India.
Earlier this year, Vodafone India and Idea Cellular announced their merger in order to become the largest telecom player in the country. It will have revenue of Rs81,600 crore and an operating profit of Rs24,400 crore.
Through a BSE filing on Monday, Idea and Vodafone stated the pan-Indian telecom tower business comprising 20,000 towers with c combined tenanct ratio of 1:1.65 will be sold to ATC, formerly known as Viom. Together, Idea Cellular and Vodafone India have a debt of Rs1.08 trillion. The merger, expected to be completed in 2018, is awaiting various approvals.
In the event that the completion of the sale of the standalone telecom tower businesses precedes the completion of the proposed Idea-Vodafone, Vodafone India will receive $592 million, while Idea will get $615 million.
Indus-the biggest tower company-is a three-way joint venture among Idea, Vodafone and Bharti Airtel, which also controls Bharti Infratel.
The deal is subject to regulatory sign-off and is expected to complete in the first half of 2018. Accordingly, private equity funds KKR and Canadian Pension Plan Investment Board (CPPIB) had emerged as the top contenders.