Indus Towers faces crack; Idea may pull out of JV

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Monday , May 12, 2008 at 0001 hrs Five months after it was formed as a great partnership initiative between the big three GSM players towards passive infrastructure sharing, Indus Towers—the venture between Bharti, Vodafone Essar and Idea Cellular—is facing its first crack. According to industry sources, AV Birla group’s Idea Cellular, with a 16% stake, is likely to pull out of the joint venture.

Bharti Airtel, through its wholly-owned subsidiary Bharti Infratel, and Vodafone Essar hold 42% each in Indus Towers, formed in December to take up infrastructure rollouts in 16 circles of Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Kolkata, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu, UP (East), UP (West) and West Bengal. While an Idea spokesperson denied any such development, industry sources said Idea is facing inherent disadvantages in Indus Towers and so is pulling out.

For one, an equity stake lower than the other two naturally puts it at a disadvantage. Further, while Bharti and Vodafone are present in the 16 circles, Idea is present in 11 circles, though it would begin operations in two more shortly.

Indus Towers has about 70,000 towers with Bharti and Vodafone transferring 30,000 towers each and Idea, 10,000.

Sources said that in tower sharing, Idea would be accorded a lower priority than the other two. Further, in the circles where it is absent right now and enters later, it would have to pay higher rentals.

Industry experts said passive infrastructure amongst service providers has its complications, as the minority owners or tenants have to share the network rollout blueprint with the owners, which acts as a competitive disadvantage.

However, since there’s capex and opex savings in sharing infrastructure, operators may not prefer going for standalone tower companies.