India's Telecom Tower Cos To Grow 10% By 2019

by CXOtoday News Desk    Mar 30, 2016

telcos

Telecom tower companies in India will post a revenue growth of about 10 percent over the next two years, as mobile operators are expanding their 3G and 4G footprint and will seek to lease more tower space, according to Moody’s Investors Service.

The report on Indian and Indonesian tower companies titled “Revenue Growth, Consolidation Will Accelerate as Mobile Operators Sell Towers” said mergers and acquisitions and consolidation are likely in Indian markets during the next two to three years.

“Mobile operators are looking to sell their towers and use the proceeds to fund capex and reduce debt, because for them there is a limited strategic benefit to owning towers versus leasing them. Purchasing these towers will help independent operators achieve scale and a competitive edge through expansion of their geographic footprints,” Moody’s AVP and Analyst Nidhi Dhruv said in a statement.

“We expect continued growth as mobile operators, building out and strengthening their third and fourth generation (3G and 4G) footprints, will seek to lease tower space and sell more of their own towers,”  she said, adding, “We expect overall year-on-year revenue growth of about 8-10 per cent for tower operators in India during the next one to two years.”

In contrast to Indonesian companies, Indian tower companies have stronger operating metrics and balance sheets but lower profitability. “Indian companies also have higher tenancy ratios, but their reported EBITDA (earnings before interest, taxes and depreciation) margins are lower owing to higher fuel costs and the associated accounting, as well as lower tower rental rates,” Maisam Hasnain, associate analyst at Moody’s told PTI.

According to Moody’s, Indian tower companies have significantly larger scale, when compared to their Indonesian counterparts. India, which has a much larger population and number of mobile subscribers, has more than five times the number of towers in Indonesia, it said.

“India allows up to 100 per cent foreign ownership of tower companies, but regulators have proposed reducing that level to 74 per cent. The approval process for the deployment of new towers is complex and time-consuming in both countries,” said the agency.